But the idea appears to be gaining momentum. Saudi Arabia is holding talks with officials in Pakistan, among other countries, to set up projects to grow wheat and other grains to protect itself from crises in world food supplies. Dubai-based private equity firm Abraaj Capital has already said it is looking at investing in agriculture in Pakistan  and other Gulf countries are also showing an interest.

So is this good or bad news for Pakistan?

U.S. News & World Report says there may be ”potential for large and enduring benefits on both sides. The reported sellers of under-developed farmland, Pakistan and Sudan, for example, are poor and lack the resources to make their own land productive,” it says. “Foreign investment is meant to help the investor, but in these cases it might also help the host countries by improving roads and irrigation and, of course, providing cash.”

The Financial Times last month quoted a senior Pakistani official  as saying of the talks to sell farmland to the United Arab Emirates: “Our aim is not to do away with precious farmland but in fact to raise the productivity of our farms and turn barren land in to fertile farmland.”

On the positive side is the potential for big investments in Pakistan from wealthy Gulf economies looking to use windfall oil profits to diversify away from oil.  According to one expert, the cumulative sovereign wealth fund wealth in the Middle East is now about 1.5 trillion dollars, mostly in the United Arab Emirates; and their assets could triple or quadruple in five to 10 years time.

Pakistan also has an interest in keeping relations sweet with Saudi Arabia as it seeks a deal on deferred oil payments  to ease its own financial crisis. Is this the beginning of a new version of oil for food deals?

On the negative side are all the issues about sovereignty and economic control. And of course the perennial question in emerging markets. What will it mean for the poor man who is already struggling to feed his family.

The Melchior Selected Trust Pakistan Opportunities Fund, one of the first funds to target Pakistan, believes the country’s problems have been exaggerated and sees its market as having the potential of “India at half the price”, according to this Reuters story.

It quotes Naz Khan, chief executive officer of KASB Funds in Karachi, as saying there is no reason to be particularly concerned by the tensions along the border with Afghanistan. “We have locked horns with India many times along the border with them in the last few decades,” he says. “This is just a different border and it shouldn’t affect the overall economy.”

The story prompted me to hunt around to see what else is out there painting a positive picture of Pakistan’s economy.

For starters, there is an economic growth forecast of 5.5 percent for the fiscal year starting in July, according to preliminary details on the budget due out next week. That is a level that the recession-haunted west can barely remember, let alone dream about.

Then there are record oil prices swelling the coffers of Gulf Arab states for whom Pakistan is a near neighbour and obvious investment target. The Dubai-based CPI Financial online newsletter says that investors are taking a long-term view on Pakistan’s economic turmoil. Of particular interest is a boom in Islamic banking — a sector relatively insulated from the credit crunch and dominated in the Gulf by Pakistani bankers.

CPI Financial quotes Mansoor Khan, managing director of Lahore-based law firm Khan Associates, as saying that conventional banks would probably be more affected by Pakistan’s economic turmoil than their Islamic counterparts. “The conventional banks are western, risk-averse and do not understand ‘Pakistan risk.’ Islamic banks are primarily Middle Eastern or Asian and have a better understanding of the mentality of Pakistan. They will not be put off.”

It’s also worth reading this blog on the South Asia Investor Review about Gulf Arab investors buying up farmland in Pakistan to increase food security and control inflation.

Pakistan’s economy has proved incredibly resilient in the past, surviving amongst other things, military coups, three wars with India, the division of the country into West and East Pakistan (now Bangladesh) in 1971, and tough economic sanctions after its 1998 nuclear tests. So are reports of its demise premature?

The picture may be clouded by the volatility of Pakistan’s stock market, hanging on every word of the bickering political parties elected in February, and feverishly debating the future of President Pervez Musharraf. But according to the last IMF report, a boom in foreign direct investment into Pakistan (more than $5 billion in 2006/07) was driven not so much by its — until recently — soaring stock market, but primarily by greenfield investment in areas like telecoms, manufacturing and financial services.

I’ll return to the downside risks in another blog, but in the meantime would be interested in hearing whether other people out there think Pakistan still makes it as a hot, or at least warm, emerging markets destination. It’s also worth wondering whether any shift in the origins of foreign investment in Pakistan — still dominated by the United States — towards more Gulf Arab funding would affect the political make-up of the country.

 Maybank said it had bought a 15 percent stake in Pakistan’s largest listed lender MCB Bank for $680 million, the largest banking acquisition into Pakistan, as it bet on a bright economic future despite the recent political turbulence.  It said the acquisition would give it access to ”a high-growth and under-penetrated banking market with a large population”, and that it was confident about Pakistan’s political outlook.

Part of this is clearly due to the booming business in Islamic banking. Reuters Bahrain correspondent Mohammed Abbas, who covered a Reuters summit on Islamic banking and finance in February, tells me it is no surprise that a Malaysian bank would invest in Pakistan.  Pakistani bankers basically run the Islamic finance industry in the Gulf and say Pakistan has done a lot to encourage Islamic finance. Since Malaysia’s Islamic banking industry is one of the deepest and most developed, and since  Malaysian banks have been trying to build bridges with other Islamic lenders, Pakistan is an obvious place to go. ”Given how active Pakistanis are in the industry, the fact that Malaysia is finding Pakistan fertile for expansion is logical,” he says.

So what is to be made of this Maybank deal? Was it born simply out of the growth in Islamic finance, fuelled by the oil money washing into the Gulf, and a South Asian approach to banking?

Or was there a bigger shift here, one which looks beyond the United States and its battle against al Qaeda and the Taliban and its war in Iraq, into the financial flows of the future?

I noticed that Merrill Lynch’s Soofian Zuberi, who advised on the deal, said that Maybank and MCD are likely to seek future deals together and look for opportunities in Central Asia and the Middle East. “These are markets where there is a geographic and cultural proximity that both parties can work together on,” said Zuberi.