FOREIGN DIRECT INVESTMENT IN PAKISTAN

BRIEF REVIEW OF POLICIES OF PAKISTANI GOVERENMENT REGARDING FDI IN DIFFERENT ERA’S:

1950’s    1960’s   1970’s:

Ø The private sector was the main vehicle for industrial investment during the 1950s and the 1960s . By the late 1960s the economy was largely dominated

by the private sector in important areas like banking, insurance, certain      basic industries and international trade in major commodities.

Ø Foreign investment was not allowed in the field of banking, insurance, and

commerce.

1980’s:

Ø The industrial policy statement of 1984 not only accorded equal importance to the public and private sectors but also encouraged the private sector to come forward.

Ø Foreign private investment was encouraged in the form of joint equity participation with local investors and in the areas where advanced technology, managerial and technical skills, and marketing expertise were involved.

Ø Adequate legal framework for foreign investment was provided through the Foreign Private Investment (Promotion and Protection) Act 1976 Foreign investment was also encouraged in industrial projects involving advanced technology and heavy capital outlay like engineering, basic chemicals, petrochemicals, electronics, and other capital goods industries.

Ø In order to encourage foreign direct investment in export-oriented industries, an Export Processing Zone (EPZ) was set up in Karachi. . The concessions and facilities offered by the EPZ included duty-free imports and exports of goods and tax exemptions.

Ø Pakistan began to implement a more liberal foreign investment policy as part of itsoverall economic reform program toward the end of the 1980s

Ø A Board of Investment (BOI), attached to the Prime Minister's Secretariat, was set up to help generate opportunities for FDI and provide investment services

1990’s:

Ø Originally, each foreign investment was subject to separate authorization, but this requirement was eliminated in May 1991. In general, no special registration was required for FDI, and the same rules and regulations were applied to FDI as to domestic investors

Ø Special industrial zones (SIZs) have been set up to attract foreign investment in export-oriented industries.

Ø Foreign investment in Pakistan is protected through the Constitution (Article 24) as well as through specific laws. Section 8 of the Protection of Economic Reforms Act 1992 provides legal cover to foreign investment in Pakistan.

Ø In the past, foreign investment was restricted to the manufacturing sector. Now foreign investment is allowed in sectors like agriculture and services, which constitute above three fourths of gross national product.

Ø The foreigners can now avail monetary and fiscal concessions equally with the local investors.

Ø They can invest in the fields of their choice like power generation, petro-chemical, petroleum, gas, fertilizer etc.

Ø Foreign investors can participate in local projects on 100% equity basis.

Ø Ceiling on payment of royalties abolished.

Ø No requirements of obtaining NOC from provisional government or locating the projects anywhere in the country except notified negative areas.

Investment in Pakistan-various business and service sectors

Investment policy In Pakistan divided in 3 main sectors.

·        Manufacturing or industrial sector

·        Non-manufacturing sector

·        Others sectors

Non-manufacturing sector is further classified in 3 categories.

·        Service sector

·        Infrastructure sector

·        Social sector

Whereas others sectors are as follows.

·        Tourism

·        Housing and construction

·        Information technology

1.Investment Policy in manufacturing and industrial sector:

Foreign investors are allowed to hold 100% equity of industrial projects without permission of the government. No government sanction is required for setting up any industry.

Investors are not required to obtain NO OBJECTION CERTIFICATE(NOC)from the provincial government.

2.     Investment Policy in non-manufacturing sector:

Foreign investors are allowed to hold 100% of non-manufacturing projects on registration basis.

·        Investment in service sector in Pakistan:

Foreign direct investment in a service sector is allowed in any activity subject to obtaining permission,NOCor license from the concerned agency and fulfilling the requirements of the respective sectoral policy.

·        Investment In infrastructural sector in Pakistan:

Foreign direct investment in infrastructural in allowed for infra structural projects which may include development of an Industrial zone.

·        Investment In Social sector in Pakistan:

Foreign direct investment in the social sector is allowed in the following fields

Education, Vocational/training, Human Resource development, Hospitals, Medicals and diagnostics services.

3.Investment In other sectors:

Foreign direct investors can invest in other sectors like tourism, housing, construction, information technology etc on again 100% equitable basis.

COUNTRIES, INTERESTED TO INVEST IN PAKISTAN:

There are many countries that are willing to invest in Pakistan in various projects like USA, UK, UAE, Germany, France, Hong Kong, Italy, Japan, Saudi Arabia, Canada, Netherlands,Turkey, Korea and many others.

1.     SAUDI ARABIAis interested to invest in Pakistan’s energy and agricultural sectors. It also facilitates foreign investment in various sectors of the economy including energy as the country seeks to overcome electricity shortages and spur industrial output.

2.     The United Arab Emirates (UAE)is interested in making joint ventures with Pakistan to develop agricultural land on a large scale in Sindhand Punjab, Pakistan has huge cultivatable land while UAE can bring technology that will not only improve the per acre yield but also boost supply chain from farm to markets.

UAE airline, RAK Air, has got license from Pakistan and is expected to soon start operations, which will further boost air-to-air contacts between Pakistan and the UAE. UAE companies are especially interested to invest in agriculture, mining, transportation, processing, infrastructure and power sector of Pakistan.

3.     China  also encourages the enterprises of both countries to strengthen mutually beneficial cooperation and learn from each other for common development in a manner that better complies with the rules of market economy. fPakistan‟s imports from China are value added, over 85% of its exports to China are raw materials such as cotton yarn and fabric, chrome and copper ores.  For example, copper and gold from Saindak Copper-Gold Project is exported to China in semi-finished form and re-exported to Pakistan after adding value. Chrome ore is exported to China in a raw form and China has the technology and smeltering plants that can then add value to Pakistani chrome exports.

4.     Russia is engaged to Invest in Steel, Banking Sectors. Russian investment in banking sector of Pakistan would start soon, while negotiation on Steel Mill was in progress.

5.     Japan and Korea are already investing in Pakistan’s domestic market, especially in the automotive, machinery sectors and chemical industry. A number of Korean home and telecom brands are already available in the domestic market and Pakistan’s large population offers opportunity for further growth.

6.     Italy is engaged to invest for cold storage units in Pakistan. Italian companies showed their interest to invest 150 million U.S. dollars in establishing cold storage units and refrigerator containers in Pakistan's eastern province Punjab