KARACHI: The State Bank of Pakistan (SBP) on Wednesday introduced three new categories of foreign investments under its revised policy governing equity investment abroad.

Banks have been authorised to allow remittances under the newly introduced categories, the SBP said, adding that it has “modernised the foreign exchange manual to facilitate startups, fintechs and exports”.

The central bank said the new categories were introduced after approval of the federal government. “The new policy for equity investment abroad will attract foreign direct investment (FDI) 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 equity,” said a circular issued by the SBP.

Move to facilitate startups, fintechs and exports

The 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).

The SBP’s revised policy will enable Pakistani Fintech and startup companies to channelise foreign direct investment in the country by establishing a holding company abroad against remittance of up to $10,000 and subsequent swapping of shares to mirror the shareholding of local company in the holding company.

The policy will enable the export oriented companies to establish subsidiary or branch office abroad against remittance of 10 per cent of their average annual export earnings of last three calendar years, or $100,000 whichever is higher.

The policy will allow the resident individuals of Pak­is­tan to acquire equity stake in international firms through share option plans or investment in listed securities.

Further, SBP has also allowed the private funds established and operated by Private Fund Management Companies licensed by the Securities and Exchange Companies of Pakistan to provide private equity and venture capital fund management services, to issue units of their funds to non-resident investors.

The SBP has also allowed the trading of units of funds quoted at ETF, REIT Funds and close-end mutual funds, through SCRA and PKR version of RDAs called the NRP-Non Resident Pakistanis-Rupee Value Account (NRVA).

Published in Dawn, February 11th, 2021