Staff Reporter Karachi
State Bank of Pakistan (SBP) has notified revisions in chapter 20 of the Foreign Exchange Manual to facilitate Start-ups, Fintechs and Exports.
The new policy for equity investment abroad will attract foreign direct investment through the establishment of holding companies by Pakistani fintechs and startups; support exports by facilitating exporters to establish subsidiaries or branch offices outside Pakistan; and, allow resident Pakistanis to acquire sweat equity, amongst other changes to the Foreign Exchange (FX) regulations.
Further changes in the foreign exchange regulations will facilitate portfolio investment in the country including mutual funds, Exchange Traded Funds (ETF) and Real Estate Investment Trust (REIT) Funds through Pak rupee based Roshan Digital Account (RDA) and Special Convertible Rupee Account (SCRA).
SBP, after approval of the Federal Government, has introduced three new categories of investment abroad under its revised policy governing equity investment abroad and banks have been authorized to allow remittances under newly introduced categories.
Establishment of Holding Company abroad by residents for raising capital from abroad: Pakistan’s investment regime is quite liberal that allows full freedom to repatriate profit, dividend and capital; however, some international investors prefer to invest indirectly through holding company established abroad specially in the Fintech and Startup firms.
SBP’s revised policy will enable the Pakistani Fintech and startup companies to channelize foreign direct investment in the country by establishing a holding company abroad against remittance of up to USD 10,000 and subsequent swapping of shares to mirror the shareholding of local company in the holding company.
Establishment of subsidiary/branch office abroad by export oriented companies/ firms for promoting exports: The policy will enable the export oriented companies to establish subsidiary/ branch office abroad against remittance of 10% of their average annual export earnings of last three calendar years, or USD 100,000 whichever is higher.
