The government of Pakistan has recently approved a draft of a policy on the equity investment abroad by the residents or firms that caters the needs of the whole business community. This policy aims to improve the capitals, the ease in doing a business, to promote exports, to facilitate the resident companies that are raising capital from foreign.
Dr. Abdul Hafeez Shaikh, the Finance Minister of Pakistan presided the meeting of the ECC- Economic Coordination Committee where the decision for approving the new investment policy for increasing exports and capitals was made as by the SBP’s recommendations.
This policy will allow the residents, businesses as well as the firms to just hold foreign investments as on the assumption that it will succors in improving the local exports, and to attract the venture capitals from abroad.
During the meeting, the representative of SBP reminded that the ECC entities that PBC- Pakistan Business Council, the software exporters, the venture capital firms along with the local players from start-up culture are continuously requesting for revisions of the existing policies as per the international standards.
Currently, central bank has evaluated the investment proposals that are amounting to $10 million. The proposal regarding the equity that was attached was evaluated by the SBP; however, who while turning forward their reports gives the final nod to the Ministry of Finance for ECC.
According to the report of SBP, the startups and the venture capitalists also suggest the local residents that they should be allowed to set or raise capital by simply setting up shops in the international markets. In lieu of the underlined queries and requests, the new investment policy has recently been approved, by following the terms and conditions by the finance ministry.
The new policy
New investment policy is defined in categories and according to the first category that allows exporters to set aside up to 10 percent of the average annual export earnings from the last three years, or to set with $100,000, whatever is higher, as to set up a shop without even asking for the approval of central bank.
However, this will be a benefit to export-oriented companies that are ready to set up their branches abroad and to attract export orders because the international buyers prefer to deal with branches and the representatives of the offices in the countries.
The second category of the policy allows the local players in the market to set up the holding the companies overseas just for raising the capital for the resident companies, like especially the venture capital and the fin-techs or startup firms.
The third category of the policy is related to the investments in abroad by the resident individuals. As currently, the resident individuals that can only invest in the listed securities abroad after being approved by the SBP are working.
With this new policy, the new authorized dealers and the banks could also remit the amount up to $25,000 in a year on the behalf of the resident individuals just for buying new shares in the listed securities in foreign, after the approval of the bank.