This research aims to explore the role played by Ijara-Murabaha Sukuk in attracting foreign direct investment (FDI) that adheres to Shariah principles into Pakistan’s oil sector. It focuses on the difficulties faced by the country in terms of payment for oil procurement. It highlights the recent collaboration with ARAMCO, Saudi Arabia’s national oil company, to establish the Gwadar Refinery Project. This project aims to enhance oil production, reduce costs and increase storage capacity.
Data was collected from 379 investors who participate in Ijara-Murabaha Sukuk through a questionnaire designed to evaluate how trade finance solutions, sustainability practices, transparency measures and governance structures impact FDI that comply with Shariah principles. The study also considers the moderating role of market conditions on these factors. Smart PLS 4 software was used to analyze their influence on creating an environment conducive to Shariah-compliant FDI.
The findings reveal that if the company prioritizes shariah-compliant foreign direct investment over conventional due to underlying productive activities ensuring economic growth as well as strong compliance mechanisms ensuring transparency, the multifaceted challenges associated with oil procurement, circular deficit, foreign exchange reserves and transparency problems can be solved. The groundbreaking analysis from this study will guide the major stakeholders while developing policies to convert the most expensive and massive budget deficit sector into a contributing sector of the economy.
This is a pioneering study on the application of Ijara-Murabaha Sukuk to resolve the problem of circular deficit of oil sectors of Pakistan by issuing 51% Ijara Sukuk for enhancing the capacity for the storage of oil and producing the oil from imported crude oil. 49% murabaha sukuk for importing crude oil. Successful implementation of the Shariah-compliant ARAMCO project can open the door to foreign direct investment for Pakistan and the other third economies, meeting the “Reducing Poverty of SDGs.”
