The Roshan Digital Account is yet another initiative to encourage the sixth largest diaspora (8.5 million people) in the world to invest in Pakistan’s capital markets.

In addition to enabling non-resident Pakistanis (NRPs) to invest in the country’s stock market, the Roshan Digital Account will allow them to invest in fixed deposit products offered by banks. Going forward, it will also enable NRPs to undertake residential and commercial real estate–related transactions.

But perhaps the government is looking forward to the inflow of dollars from expatriates into the specially designed saving instruments for NRPs called Naya Pakistan Certificates, which are envisaged to be launched soon. These instruments will be available in both dollars and rupees at short-term tenors with attractive rates of return. They will be in both conventional and Sharia–compliant forms.

Stock market investors are not really jumping with joy in anticipation of dollars from overseas Pakistanis in equities. Some senior market players are sceptical about an overwhelming response from the expatriates in view of several such schemes launched in the past.

A fund manager said he believed there might be little interest from expatriates to invest in the market for day-to-day investments. But NRPs could want to put money in the initial public offerings (IPOs) and exchange-traded funds (ETFs) just like non-resident Indians participate heavily in such products in the neighbouring country.

Market players don’t expect an overwhelming response from overseas Pakistanis to the Roshan Digital Account scheme

He said the country was strong on the side of the launch and distribution of financial products, but poor on implementation and awareness creation. “It’s been some time that the State Bank of Pakistan (SBP) announced the launch of Roshan Digital Account, but the enthusiasm on its promotion is generally lacking,” he said.

The promotion of such initiatives requires an aggressive awareness campaign through road shows in countries that host a large number of NRPs. They are also unsure about the success of providing NRPs with the opportunity to “remotely open an account in Pakistan through an entirely digital and online process without any need to visit a bank branch”.

Their cynicism stems from the fact that the opening of new bank accounts is such an arduous process for locals. The process requires too many documents, source of deposits and know-your-customer forms. “How would the government be able to convince the expatriates about the safety of their investment as commercial banks have been directed to complete customer due diligence within 48 hours,” he said. It is for that reason that a sustained campaign of road shows and a series of meetings with NRPs ought to be taken up so that it might offer comfort and faith to the expatriates.

But some senior people in the stock market and industry regard the Roshan Digital Account as a worthy initiative as far as the investment from NRPs is concerned. Since the initiative launched by the SBP in collaboration with commercial banks promises to provide a new system of banking solutions for NRPs, many people appreciate the reduced role of the SBP between foreign Pakistani investors and the banks.

Ahmed Chinoy, an elected director of the Pakistan Stock Exchange (PSX), believed the government had facilitated Pakistanis living and earning abroad to invest in their home country. He highlighted the NRPs’ direct access to the Central Depository Company (CDC) for share business without the SBP’s involvement. He said it would remove a lot of hurdles and NRPs should be comfortable dealing through commercial banks.

Mr Chinoy argued that the digital account initiative should not have been restricted to investment in stocks and some other schemes. It should have been allowed for investments in all avenues, including the industry, he added.

He also suggested that instead of restricting the scheme to NRPs, it should be extended to include all foreign investors. The recent trend in the share market also hinted at years of foreign outflows coming to a halt. A week ago, foreign investors were net buyers of shares worth $8.7m. In case of more purchases, it would hopefully curtail the huge foreign outflows from equities that amounted to $353m since the beginning of 2020.

As chairman of the Pakistan Cloth Merchants’ Association, Mr Chinoy said foreign Pakistani investors who wished to invest in industrial products should also be freed from the cumbersome intermediary role of the SBP. It would give the investor quicker access to the Pakistani entrepreneur and result in a rapid inflow of foreign direct investment (FDI).

The SBP in its introductory note on the Roshan Digital Account states: “Funds in the Roshan Digital Account would be fully repatriable — they can be remitted back from Pakistan without any regulatory approval.”

Many investors and businessmen reckoned that it was a bold new step, but lamented that it would be unfair not to extend it to other businesses and investment avenues. All that the government could lose would be the outflow of a higher sum in repatriation due to unfavourable exchange rate fluctuations. But on the other hand, expatriates who invest in industrial projects in partnership with locals would not have to take the longer route of first investing the money in the stock market to launder it to repatriate.

Moreover, with no interference from the central bank, foreign Pakistani investors would be comfortable in recalling original sums of investment and profits to their country of residence through commercial banks without having to resort to the illegal and precarious route of hawala and hundi.

But those who have little faith in the success of the Roshan Digital Account take their cue from the lukewarm response to its precedent, Pakistan Banao Certificate. In his frantic search for dollars to build Pakistan’s depleting foreign exchange reserves, Prime Minister Imran Khan launched dollar-denominated diaspora bonds on Feb 2, 2019, requiring a minimum investment of $5,000 from overseas Pakistanis. The certificate offered a lucrative return that was twice the rate available in most other countries. The profit rate on the three-year instrument was 6.25 per cent payable bi-annually. On the five-year paper, it was 6.75pc payable bi-annually.

But by the end of June that year, dollars generated from these bonds were only $26m from less than 600 expatriates. The actual investment ran far short of the $3 billion target at the time of the bond issuance. The prime minister was believed to have blamed his economic team for its failure to proactively market the product overseas through road shows and other promotional measures.

Published in Dawn, The Business and Finance Weekly, August 24th, 2020