Positive spillovers of the Gulf crisis

Regional instability could redirect data infrastructure, outsourcing and skilled labour to Pakistan

ISLAMABAD:

A global economic reset has been due for some time, but the cautionary leadership approach left it unaddressed. It is now unfolding through various manifestations, including political and geographic conflicts.

The ongoing conflict in the Gulf is certainly a political problem that is, and will, affect regional and global economies in a significant way. More so for Pakistan from a geoeconomic perspective, particularly due to the potential loss of inward remittances. There is, however, an opportunity in crisis.

A prolonged crisis in the Gulf that disrupts supply chains, local infrastructure and business operations would undoubtedly force a strategic realignment of physical and digital assets, as well as human capital. If the perceived risk of hosting critical digital infrastructure or maintaining large expatriate workforces in the Gulf rises, Pakistan is uniquely positioned to absorb some of that displacement. The Gulf, particularly the UAE and Saudi Arabia, has heavily invested in becoming a regional hub for data centres and digital services. A crisis threatening physical security, power grids or submarine cables could trigger a “digital flight to safety.”

While global tech giants might hesitate to immediately move their primary Tier-IV data centres to Pakistan due to historical energy and internet reliability issues, there would likely be a massive surge in demand for secondary backup sites and Disaster Recovery as a Service (DRaaS). Pakistan’s Special Technology Zones (STZs), which offer tax exemptions and ease of capital repatriation, could attract Gulf-based enterprises seeking to mirror their data in a geographically close but physically separate location.

If Gulf businesses are forced to downsize their physical footprints or face operational disruptions, they will aggressively outsource to maintain continuity. Pakistan’s IT and IT-enabled services (ITeS) sector would be a primary beneficiary. Everything from financial auditing and customer support to HR management and IT troubleshooting could be routed to Pakistani service providers.

As Gulf-based companies scramble to migrate operations to the cloud or establish remote workflows, demand for corporate consulting and IT architecture services would rise sharply, offering Pakistani firms an opportunity to capture a lucrative advisory market.

In addition, the Gulf hosts millions of Pakistani expatriates. While the majority are blue-collar workers, a significant percentage comprises highly skilled professionals, including engineers, financial analysts, corporate executives, doctors and IT architects. A forced repatriation of this demographic would act as a massive, albeit abrupt, injection of human capital into Pakistan.

Returning professionals bring world-class corporate governance, global best practices and advanced technical skills. This would serve as an immediate talent upgrade for local industries, particularly in banking, telecommunications, healthcare and engineering.

Highly skilled expats rarely return home to remain idle. They often bring substantial savings and extensive professional networks. This capital, combined with the need to generate income locally, has historically sparked waves of entrepreneurship. We would likely see a surge in venture-backed startups, specialised consulting firms and modern small and medium enterprises (SMEs).

The integration of seasoned, Gulf-trained managers into the domestic corporate hierarchy would accelerate knowledge transfer. Local junior employees would benefit from mentorship and heightened operational standards, effectively raising the productivity of the broader labour pool. Traditionally, expats send money back to buy land. However, an expat returning to live in Pakistan is more likely to invest in productive assets, such as starting a business, investing in local stock markets or funding commercial projects, because they require sustainable, active domestic income rather than passive land banking.

There is also potential to attract offloaded real estate investments from Gulf countries. Reportedly, a major portion of these investments was made through undocumented outflows, but offering an amnesty scheme for inward flows of such divestments may yield positive results for Pakistan’s economy.

To fully capitalise on these potential gains, Pakistan would need to proactively remove traditional bottlenecks. Returning talent may quickly become frustrated by bureaucratic red tape, and foreign data cannot flow into the country if internet firewalls or power outages disrupt connectivity. The government and private sector would need to move swiftly to guarantee uninterrupted power, likely through captive solar grids, and ensure a seamless ease of doing business.

THE WRITER IS AN INTERNATIONAL ECONOMIST