The Emirates Trap: How UAE Money Captured Pakistan’s Sovereignty
From ports and military businesses to banks and labour, two decades of Emirati money have turned Pakistan’s economic lifelines into strategic leverage.
Over the past two decades, the United Arab Emirates has gone from a “brotherly investor” to one of the most powerful external actors inside Pakistan’s economy. What started in the mid‑2000s as standard foreign investment in telecoms, ports and real estate has, by 2026, turned into a dense web of financial, infrastructural and institutional leverage. That web now touches Pakistan’s ports, its military business empire, its banking system, its agricultural land, its mineral wealth and even the fate of millions of its workers abroad.
For people inside Pakistan’s security establishment, this is no longer just a story about trade or development. It is now very much a story about sovereignty and who ultimately controls the chokepoints, flows and institutions that shape Pakistan’s freedom to act.
From “normal” FDI to embedded presence
The first phase of UAE engagement with Pakistan in the 2000s looked fairly familiar. Big Gulf brands arrived, promising modernisation and capital.
In 2005, Etisalat, the Abu Dhabi telecom giant, acquired a 26 percent stake and management control of Pakistan Telecommunication Company Limited (PTCL) in a deal worth about 2.6 billion dollars. That deal effectively handed a foreign operator control over Pakistan’s fixed line backbone and a large part of its telecom infrastructure. It was controversial from the start. A long running dispute over roughly 800 million dollars in withheld payments, linked to delays in transferring PTCL property to Etisalat, has dragged on for well over a decade. Yet PTCL has continued to hold and profit from valuable land while the state has struggled to enforce the original terms.
Around the same period, Dubai’s DP World secured a concession to operate the main container terminal at Port Qasim near Karachi. The company quickly became the key player in container handling for a significant share of Pakistan’s external trade. On paper, this was a straightforward modernisation step that brought in global expertise and better equipment.
Real estate was another visible frontier. Emaar Properties, the developer behind some of Dubai’s most famous projects, entered joint ventures with Pakistan’s Defence Housing Authority (DHA), a powerful, military linked housing body, on high end residential and commercial projects in Karachi and Islamabad. The Crescent Bay project in Karachi alone was initially valued at around 2.4 billion dollars and marketed as a symbol of a new, waterfront lifestyle. Years later, delays, disputes and partial suspensions left many buyers stranded and reinforced a now familiar pattern. Military and Gulf backed real estate schemes created wealth at the top while resentment grew among those pushed aside or left unpaid.
Beneath these high profile projects, UAE linked money also moved quietly into agriculture. Studies of Gulf investment in Pakistan’s farm sector describe how, by the late 2000s, Gulf funds had targeted large land leases and acquisitions in fertile zones and parts of Balochistan. The goal was simple. Gulf states with limited water at home wanted to grow water intensive crops abroad, then ship them back for their own food security.
At that stage, the relationship still looked like a conventional one. Pakistan received investment. The UAE got returns and access to assets. The balance started to shift when Pakistan’s repeated balance of payments crises collided with Abu Dhabi’s willingness to act as a financial backstop.
The financial hook
The second phase began in earnest with crisis. In 2018 and 2019, Pakistan once again turned to the International Monetary Fund as reserves shrank and the current account deficit widened. In early 2019, the UAE deposited around 2 to 3 billion dollars in Pakistan’s central bank as “support” to shore up foreign exchange. This money, along with similar deposits from Saudi Arabia, was crucial in stabilising the rupee and helping Islamabad reach an IMF programme.
A similar pattern appeared in early 2023. Pakistan was again close to default. The IMF made clear that releasing funds under a new standby arrangement depended on firm financing assurances from key partners. Once again, Abu Dhabi came in with a rollover of about 2 billion dollars in existing deposits and another 1 billion dollar loan. That support, alongside help from Riyadh and Beijing, was key to closing the external financing gap.
By mid 2023, it was widely understood that Pakistan’s IMF programme now sat on three pillars: the Fund itself, China and the Gulf states. The UAE was no longer just a friendly investor. It had become a systemic creditor. Its decisions on rollovers and new deposits could, in the extreme, tip Pakistan toward default or pull it back from the brink.
In 2024, Pakistani officials and international media reported that China, Saudi Arabia and the UAE together had agreed to roll over about 12 billion dollars in deposits and loans for at least another year, including about 2 billion dollars from Abu Dhabi. On paper, this looked like generous support. In practice, it deepened a pattern in which Pakistan staggered from one short term rescue to the next while long term leverage accumulated in external hands.
AD Ports and half a century at Karachi
If financial support embedded the UAE inside Pakistan’s macroeconomy, the next layer embedded it inside Pakistan’s physical trade lifelines.
In June 2023, Abu Dhabi’s AD Ports Group signed a 50 year concession agreement with the Karachi Port Trust to operate and develop Karachi Gateway Terminal Limited, covering berths 6 to 9 at the port’s East Wharf. Under the deal, a joint venture led by AD Ports would take over management of the terminal, invest around 220 million dollars over the first ten years and lift capacity to around one million containers a year.
One detail mattered greatly. AD Ports explained to investors that the project’s revenue was fully dollarised. In other words, it earned in hard currency and avoided direct exposure to the Pakistani rupee. For the UAE, that meant a long term, relatively insulated income stream. For Pakistan, it meant that a foreign firm would control a core piece of infrastructure at its primary port for half a century.
Over the next two years, AD Ports did not stop there. It signed further memoranda of understanding with Pakistan’s government on cooperation in customs digitalisation, railway links, airport logistics and maritime transport. It announced a majority owned logistics joint venture to run inland corridors between Karachi and the country’s industrial heartlands. It then teamed up with global trader Louis Dreyfus to plan a clean bulk agricultural terminal at Karachi, dedicated to handling grain and other food commodities.
All of this sits alongside DP World’s earlier control of a major terminal at Port Qasim. The net effect is that Emirati controlled operators now dominate both of Pakistan’s key seaborne trade gateways, while also pushing into the networks that connect those ports to the hinterland.
Looked at from a purely commercial angle, this brings investment, technology and scale. Looked at from a security angle, it raises uncomfortable questions. What happens if relations sour? How much insight into cargo flows and supply chains does a foreign operator gain when it sits at both ends of the logistics chain? How easy would it be to exert pressure simply by slowing or disrupting operations at critical terminals?
Turning debt into a stake in the army’s business empire
Probably the most sensitive strand of all surfaced at the end of 2025. Facing upcoming repayment deadlines and limited room to manoeuvre, Pakistani officials and military leaders agreed with Abu Dhabi to convert part of Pakistan’s debt into equity connected to the Fauji Foundation, the army’s flagship commercial conglomerate.
By December 2025, Pakistan needed to settle roughly 1 billion dollars worth of deposits that the UAE had placed with its central bank and that were coming due in March 2026. With the fiscal position tight and fresh borrowing politically and economically costly, the government floated a different idea. Rather than paying in cash, it would allow the UAE to acquire a stake in assets associated with Fauji Foundation.
Reports in Pakistani and regional business media described a structure where the UAE would put funds into a special vehicle. Fauji Foundation would then inject shares of its listed companies into that vehicle at agreed valuations, including stakes in Fauji Fertilizer, Fauji Cement, Askari Bank and related holdings. In return, the central bank liability would be considered settled.
The fine details are still being hammered out, but the broad direction is clear. Pakistan is extinguishing part of its sovereign debt by handing a foreign state exposure to the core of its military commercial empire.
Fauji Foundation started life in the 1950s as a charitable trust for ex servicemen. Over time it grew into Pakistan’s richest business group, with a web of companies across fertilizers, cement, food, energy, banking, insurance and property. Together with other military linked enterprises, its assets are often estimated in the tens of billions of dollars. These entities sit in a legal and political grey zone. They are effectively controlled by serving and retired officers but present themselves as private organisations, avoiding the kind of parliamentary and public scrutiny applied to state owned firms.
By allowing a foreign partner to buy in to this structure, Pakistan’s leadership has crossed a new line. This is not a standard privatisation of a tired state factory. It is the insertion of external financial interests into the economic base of the institution that dominates Pakistan’s security and foreign policy. It also sends a simple signal. When Pakistan cannot pay its debts in cash, it will increasingly pay with pieces of its most strategic assets.
For the UAE, the numbers are manageable. One billion dollars is a small slice of its global portfolio. For Pakistan, the precedent may be far more consequential than the money itself.
IHC, banks and Balochistan’s minerals
Running alongside the AD Ports and Fauji deals is another axis of influence, centred on International Holding Company. This Abu Dhabi group has mushroomed into one of the Gulf’s most valuable firms, with interests in everything from food to energy to technology. It is chaired by Sheikh Tahnoon bin Zayed Al Nahyan, who also serves as the UAE’s national security adviser. That dual role blurs any neat line between commercial decisions and strategic calculations.
In October 2025, IHC bought just over 82 percent of First Women Bank Limited, a Pakistani state owned bank that had long struggled to find a clear commercial footing. The price was around 5 billion Pakistani rupees. What made this deal stand out was not just the buyer, but the legal route. The sale took place under Pakistan’s Inter Governmental Commercial Transactions Act, a law that allows the government to sell or lease assets directly to foreign states or their nominated entities, without the normal privatisation bureaucracy and open bidding.
Officials in Islamabad and Abu Dhabi promoted the deal as a breakthrough for women’s banking and digital modernisation. IHC promised to overhaul FWBL using artificial intelligence and other technologies. Yet the governance question remains. A company rooted in the security establishment of another state now controls a Pakistani bank and its customer base, under a framework specifically designed to limit public scrutiny.
Earlier that same year, IHC’s mining arm, International Resources Holding, signed a joint venture with the Balochistan government to explore and develop two mineral blocks, EL 302 and EL 303, taking a 50 percent plus one share. These blocks lie in a province that is both rich in copper, gold and other resources and marked by decades of insurgency and deep resentment over how Islamabad and outside investors have profited from its land.
Observers of Gulf strategy see IRH’s entry into Balochistan as part of a wider push by the UAE to secure upstream access to critical minerals needed for its own energy transition and defence industries. With Chinese, Western and now Gulf players all moving into the same rough terrain, the risk that local concerns and national interests are sidelined grows.
Land, water and the cost of feeding others
Ports, banks and minerals are visible. Land and water are often not. Yet the way Gulf investment intersects with Pakistan’s agricultural and water stress may be one of the most important long term issues in this story.
For years, Pakistani policymakers have tried to attract Gulf capital into what they call corporate farming. The pitch has been straightforward. Pakistan has land and, at least on paper, irrigation infrastructure. Gulf states have money but lack water and arable land. Put the two together and you get large, modern farms that can feed both Pakistanis and Gulf populations.
In 2023, Islamabad openly sought about 6 billion dollars from Saudi Arabia and other Gulf partners for these schemes, with a goal of bringing roughly 1.5 million new acres into cultivation and mechanising tens of millions more. Fauji Foundation’s agribusiness arm has been central to designing and running many of these projects. Policy documents and media reporting indicate that a significant share of output from these farms, often described as around 40 percent, is earmarked specifically for export to Gulf markets, with the rest staying in Pakistan.
The problem is that this vision collides head on with Pakistan’s deepening water crisis. Over the past decade, farmers have rapidly expanded the use of solar powered tube wells. Cheap panels mean they can pump groundwater far more easily and for far longer than before. Combined with a push towards water intensive crops such as rice, this has accelerated depletion of aquifers that were already under pressure.
In Punjab, for example, recent reporting and technical studies have shown that the water table has dropped below what hydrologists consider a critical depth, around 60 feet, in a rapidly growing share of the province. In some districts, the share of areas where groundwater lies deeper than 80 feet has more than doubled in only a few years. Once aquifers are drawn down beyond certain points, they become extraordinarily difficult or impossible to recharge.
In plain language, Pakistan is using up non renewable groundwater to grow food. When that food is shipped abroad under long term off take arrangements to feed wealthier Gulf populations, the question is no longer just about trade balances. It becomes a question about whether a state that is itself water scarce can afford to export part of its natural capital in this way.
Workers, visas and silent pressure
Another part of the picture involves people rather than ports or pipelines. Between one and two million Pakistanis work in the UAE, many of them in construction, services and other low paid sectors. Their remittances are a lifeline. In a typical year, money sent home from the UAE alone can account for several billion dollars in foreign exchange, supporting millions of family members and easing pressure on Pakistan’s external account.
That dependence provides the UAE with a quiet but potent lever. In late 2024 and into 2025, Emirati authorities sharply reduced or effectively halted the issuance of many visas to Pakistani citizens, publicly citing a rise in organised begging, petty crime and document fraud. Social media, travel agents and lawmakers in Pakistan all described how work and visit visas had become “almost impossible” for ordinary applicants to secure.
Although UAE officials later stressed that there was no blanket ban, the episode showed how quickly labour mobility and remittance flows could be choked. For a country that repeatedly scrambles to cover its import bills and debt payments, even a temporary hit to remittances from a major source can cause serious pain. That is before counting the social impact on families whose breadwinners are stuck at home.
Regional analysts also noted that the tightening of visas came at a time when the UAE was deepening its strategic partnership with India and when Pakistan was struggling to align itself with shifting Gulf and Western expectations on issues like Kashmir and Israel. Whether or not the visa squeeze was explicitly political, it was read in Pakistan as a warning about how quickly the UAE can flex its muscles if displeased.
Foreign policy in a tighter cage
All of this economic and social exposure is playing out as the regional chessboard itself is being rearranged. Over the past decade, the UAE has built a close relationship with India that spans trade, defence, technology and diplomacy. Their leaders praise each other in public and talk of strategic partnership. Annual trade has surged into the tens of billions of dollars.
At the same time, Abu Dhabi has normalised relations with Israel under the Abraham Accords. That move has, in turn, tied the UAE more tightly into a U.S. backed grouping that sees Iran, political Islam and various non state actors as primary threats.
From Pakistan’s vantage point, both shifts are uncomfortable. Its foreign policy has long prioritised support for the Palestinian cause and treated India as its main security rival. Islamabad has traditionally relied on Gulf rhetoric about Muslim solidarity to buttress its own narrative on Kashmir. Today, that solidarity is far more conditional.
During recent India Pakistan flare ups, Gulf capitals, including Abu Dhabi, have largely presented themselves as neutral mediators. They have urged restraint on both sides rather than endorsing Pakistan’s claims. Behind closed doors, Pakistani officials and commentators say that some Gulf partners now press Islamabad to tone down its public rhetoric on Kashmir and to eventually reconsider its strict non recognition stance toward Israel.
In theory, a sovereign state can simply say no. In practice, it is much harder to do that when the same partners pressing for “modernisation” of foreign policy are also holding billions in your central bank, operating your main ports and employing your citizens.
The SIFC and the centrality of the military
Inside Pakistan, these external shifts have coincided with an internal redesign of who makes economic decisions. In 2023, the state created the Special Investment Facilitation Council. This body brings together civilian ministries and the military leadership with a declared aim of fast tracking foreign investment, especially from the Gulf.
In practice, this has formalised something that had already been happening informally for years. Gulf governments and sovereign funds prefer dealing directly with Pakistan’s generals. They see them as more stable, more capable of delivering on promises and less constrained by electoral cycles. The SIFC gives that preference an institutional home. The army chief now sits visibly at the centre of Pakistan’s pitch to Abu Dhabi, Riyadh and Doha, promising policy continuity and security guarantees for large projects.
Analysts of civil military relations in Pakistan warn that this fusion of military authority and economic brokerage comes at a democratic cost. It sidelines parliament and civilian agencies in setting strategic economic directions. It also creates new channels through which foreign governments can influence the armed forces not only as a defence partner but as a business partner.
When that dynamic is combined with long term port concessions, debt exchanges for military equity, corporate farming for Gulf food supply and bank sales through exceptional legal frameworks, the picture that emerges is not a collection of isolated deals. It is a pattern.
From partnership to structural dependence
Two decades after the first wave of Emirati investment, the balance sheet looks stark.
On one side, UAE linked entities are deeply embedded in Pakistan’s critical infrastructure and economic core. They run or share control of the main container and bulk terminals at Karachi and Port Qasim. They are building inland logistics networks that will eventually handle a large share of cargo moving between ports and industrial centres. They have bought into a Pakistani bank and into exploration rights for Balochistan’s minerals. They have negotiated a path into the army’s biggest commercial conglomerate. They are tied to sprawling agricultural schemes in a country whose groundwater is in trouble. They employ huge numbers of Pakistani workers and can, by adjusting visa policies, influence remittance flows.
On the other side, Pakistan remains financially fragile and politically fragmented. It is on yet another IMF programme. Its external debt is large relative to the size of its economy. Servicing that debt consumes a hefty slice of its national income each year. Tax collection remains weak. Civilian governments are short lived and often overshadowed by the military. That military, in turn, is more directly involved than ever in brokering economic deals with Gulf capitals.
None of this means the UAE is uniquely malign, or that Pakistan is just a victim. Pakistani elites, military and civilian, have consistently invited this model in, partly because it offers short term relief and rent seeking opportunities that domestic reform does not. Other powers, above all China and the IMF backed Western system, also wield serious leverage over Pakistan’s choices.
What does set the UAE’s role apart is the breadth of its reach across sectors that touch core sovereignty. It is not only a lender, or an investor, or an employer of migrants. It is all of these at once, with growing influence over ports, debt, military business, land, minerals, finance and labour.
At some point, that accumulation of leverage forces a sober question. How much freedom does a state really have when it can no longer credibly threaten to default without risking the sale of strategic assets, when its main ports are essentially on lease to a foreign partner for 50 years, when its military’s business arm has foreign shareholders, when its own water is being used to grow food for others and when millions of its citizens depend on the goodwill of a government abroad to keep working?
The answer does not lie in isolation. Pakistan cannot and should not cut itself off from Gulf capital or from global markets. The lesson is sharper and more practical. Economic policy is now inseparable from national security. The terms of investment, the sectors involved, the duration of concessions, the laws used to sell public assets, the way military and civilian authorities share power over these decisions, all of that has strategic consequences.
Over the next decade, the central challenge for Pakistan will be whether it can rebalance this relationship. That would mean diversifying its economic partnerships so that no single external actor has outsized leverage. It would mean strengthening tax collection and domestic savings so that the state can invest without constantly begging abroad. It would mean subjecting military business empires to the same transparency expected of others. It would also mean putting real, enforceable limits on the sale or long term lease of assets that are clearly strategic.
The alternative is clear enough from the trajectory of the past 20 years. If current patterns continue, Pakistan will not lose sovereignty in one dramatic moment. It will instead watch it seep away, one concession agreement, one equity swap, one emergency deposit and one quiet visa decision at a time.