Pakistan
Last update: June 2008
Competitive Advantages
Business Environment
Located in the heart of Asia, Pakistan is the gateway to the energy rich Central Asian States, the financially liquid Gulf States and the economically advanced Far Eastern tigers. This strategic advantage alone makes Pakistan a marketplace teeming with possibilities.
Here the people are mostly English proficient, hardworking and intelligent. They have lesser costs.
Well-established infrastructure and legal systems are deep-rooted foundation to lure investment. It includes comprehensive road, rail, sea links; good quality telecommunications and IT services; modern company laws and long-standing corporate culture.
A composite scheme of National Industrial Zones engulfing industrial estates, Free Industrial Zones, Free Trade Zones and Export-Oriented Units (EOU) and Estates for small and medium industries within areas of its boundary has been launched to promote exports. In addition, establishment of export-oriented units will be allowed to be set up all over the country.
Foreign investors are allowed participation in industrial projects, on the basis of 100% foreign equity, without any permission from the Government.
The manufacturing sector was open to foreign investment. Now, the policy regime has been liberalized by opening up other economic sectors to FDI and by mobilizing domestic financial resources to encourage investment.
Full repatriation of capital gains, dividends and profits.
There is no requirement to obtain a No Objection Certificate (NOC) from the Provincial Governments for the establishment of projects.
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Economic Outlook
Pakistan is one of the fastest growing economies of the world having touched a GDP growth rate of 8.4% in 2005. Today Pakistan has 160 million consumers with an ever-growing middle class. Foreign investment has risen sharply from an average of $400 million in the 1990s to over $ 3.5 billion in 2005-06. Fiscal deficit has declined from an average 7% of GDP in the 1990s to around 3% in recent years. And FOREX reserves have increased from $3.22 billion in 2000-1 to $13.14 billion in 2005-6.
Large and growing domestic market includes 140 million consumers with growing incomes and a growing middle-class moving to sophisticated consumption habits.
Abundant land and natural resources exists in Pakistan including extensive agricultural land, crop production; wheat, cotton, rice, fruit and vegetables; mineral reserves; coal, crude oil, natural gas, copper, iron ore, gypsum; and fisheries and livestock production.
Tourism has been declared an industry and as such holds great promise for prospective investors interested in exploring the true potential of a land as rich and diverse in its culture as it is in its geographical distribution. From snow-capped mountains in the north, with vast fertile plains of the Punjab, rugged land of the south, deserts and a long seacoast, Pakistan has all the hall marks to become a major tourist attraction.
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Investment policies, laws and regulations
Current investment policies have been tailor made to suit investor needs. Pakistan 's policy trends have been consistent, with liberalization, de-regulation, Privatization, and facilitation being its foremost cornerstones.
The capital markets are being modernized, and reforms have resulted in development of infrastructure in the stock exchanges of the country. The Securities and Exchange Commission has improved the regulatory environment of the stock exchanges, corporate bond market and the leasing sector. Whilst the Central Board of Revenue has facilitated structural reform in tax and tariffs and the State Bank of Pakistan has invigorated the banking sector into high returns on investment.
Pakistan has a liberal foreign exchange regime with few restrictions on holding foreign exchange and bringing it in or out of the country. There are no limits on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or payments for imported inputs.
The facility for contracting foreign private loans is available to all those foreign investors who make investment in the approved sectors.
Foreign controlled manufacturing concerns are allowed to borrow on the domestic market according to their requirements.
There is a greater degree of transparency in procurement practices since the current government took office in October 1999. International tenders are properly advertised and there is no sole sourcing, as contract specifications are not made according to any company's requirements, as was done in the past. Sanctity of contracts, however, remains a major concern for companies.
Foreign controlled semi-manufacturing and non-manufacturing concerns can access loans equal to @ 75% & 50%, respectively, of their paid up capital including reserves.
There is no restriction on payment of royalty / technical fee etc., in the manufacturing sector, allowed non in non-manufacturing sectors. For non-manufacturing sector, the initial lump sum fee should not exceed US $ 100,000. The maximum rate will be 5% of net sales. Initial period for which such fees may be allowed should not exceed 5 year. Further information can be supplied by BOI.
Reducing minimum foreign equity from US$ 0.5 million to US$ 0.3 million.
Zero import duties on capital goods, plant and machinery and equipment not manufactured locally. Central Board of Revenue (CBR) can supply a list of locally manufactured good. In case of doubt the investor is invited to consult the Board of Investment (BOI).
The import tariff on agriculture machinery (not manufactured locally) for registered corporate agricultural projects will be zero-rated.
The investors who invest in the newly opened sectors can import plant, machinery & equipment (not manufactured locally) at discounted rate of customs duty which is 10% and also avail first year allowance @ of 50% of the cost of plant, machinery & equipment.
Zero import duties on raw materials used in the production of exports.
Remittance of royalty, technology and franchise fee allowed to projects in social, service, infrastructure, agriculture and international chains food franchise.
Regulatory reforms have led to the establishment of a legal framework for licensing and regulating private housing lenders. At present, five private housing companies are operating in a regulated environment and offering a variety of loan instruments. In order to mobilize funds, private housing companies may issue certificates of investment.
Source: President of Pakistan’s website & Pakistan Board of Investment
Last update: June 2008
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