No instant returns from Pak investments abroad

Islamabad, May 4 :

The equity-based investments made by resident Pakistanis abroad are unlikely to yield immediate returns, Pakistan’s finance ministry has said.

“Investments made by resident Pakistanis abroad are unlikely to generate major profit repatriation to Pakistan as the sponsors may retain their earnings in the concerned countries for business requirements,” official sources quoted the finance ministry as saying in a recent report submitted to the government.

The government had allowed resident Pakistanis to invest abroad in May 2005, subject to fulfilment of specific conditions. The State Bank of Pakistan (SBP) approves investment proposals of up to $5 million, while higher amounts are referred to the Economic Coordination Committee (ECC).

Sources said that from May to December last year, SBP and ECC approved investment transactions amounting to $307 million, of which the ECC and the central bank cleared proposals of $186 million and $121 million, respectively.

Investments worth $90 million were later abandoned, including Engro Chemicals’ investment in Oman ($77 million) - which was shelved because the project turned out to be financially unfeasible - and Lakson Tobacco Company’s project of $5 million, among others, which did not materialise.

The investments were made in sectors, like manufacturing ventures (29 per cent), information technology (22.3 per cent), chemicals and pharmaceutical (16.2 per cent), financial services (14.2 per cent) and service sector (12.4 per cent).

One-fourth of the total investments were made in Oman, another 15.6 per cent in Morocco and 14 per cent in Bermuda. Other important destinations were the US, Bangladesh, the UAE and Sudan. The remaining investments were dispersed across the globe.

The finance ministry, in its report, said that investments (deducting the projects shelved) were low — close to $217 million — and given the leads and lags in setting up establishments so far, only $155 million had been actually disbursed.

The ministry said small investments abroad had been made by Pakistani businessmen to largely set foot in new markets and extend their market reach, internationalise Pakistani brands (like Hotel PC) and to explore opportunities to attract investment inflows in Pakistan.

In some cases, like Fauji Fertilizer, the strategic decision for investments was driven mainly by the need to secure supplies (phosphoric acid) for fertiliser plants.

In the financial sector, some investments were driven by the needs of overall branch network and minimum regulatory requirements of host countries.