Pakistan Investment Climate & Legal Framework

1

Sajjad Hussain, DirectorBOARD
OF INVESTMENTPakistan
Board of Investment
PRIME MINISTER’S OFFICESEQUENCE
1: Pakistan : An Introduction
2: Pakistan Investment Regime
3: Legal Frame Work
4: Investment Trends
5: Special Economic Zones
6: Potential sites & notified SEZs
7: Automotive Development Policy

2

PAKISTAN:
An Introduction

3

••
•
•••
•
•
•

Pakistan Board of Investment

Established in 1991
Pakistan’s apex foreign Investment Promotion andfacilitation agency.
Secretariat of Special Economic Zones, ApprovalCommittee & Board of Approvals
Secretariat of CPEC for promotion ofindustrialization
Seminars on investment in Pakistan and othercountries
Grant permission for setting up Branch/ Liaison
Office by Foreign companies
Work Visa recommendations to expatriates
Liaison with all Federal & Provincial Ministries
Security clearances of expatriates

Where is Pakistan?
Dubai
KarachiAccessBangkok-Karachi
5 hrs
Dubai-Karachi
2 hrs

5Bangkok

GEOGRAPHICAL LOCATION OF PAKISTANAZERBAIJAN

Land
lockedCentralAsia

UZBEKISTANTURKMANISTANKYRGYZSTAN

Booming
China

TAJIKISTANCHINADISPUTEDTERRITORY

AFGHANISTAN
IRAN
PAKISTANXIZANG (TIBET)

Capital &Energy
Rich
MiddleEast

NEPAL
BHUTANINDIAGULF STATESARABIAN SEA

Progressing
BANGLADESH
South Asia
MYANMAR(BURMA)

6Country Information
Islamic Republic of Pakistan
Capital City
Major Cities

Islamabad (1.01 million)

Land Area

796,095㎢ (Double of Japan)

Geography

South Asia, bordered with China, Afghanistan, Iran,India. Coatline: 1,046km

Population/
growth rate

207.7million / 2.4% (2017, SBP)

Language

Urdu (National), English (Official)

Literacy Rate

58% (2016, PBS*)

Government

Federal parliamentary system
President: Mamnoon Hussain
Prime Minister: Shahid Khaqan Abbasi

AdministrativeUnits

4 Provinces: Pujab, Balochistan, Sindh, Khyber
Pakhtunkhwa (KP), Islamabad Capital

1.Karachi (14.91million)
2.Lahor （11.0million)

Middle Class: 45% and 29-39 years age = 31%

ECONOMIC OUTLOOK










Exports$20.4 billion

Imports$52.9 billion

Remittances$19.3 billion

Forex Reserves$21.4 billion

Pakistan Stock exchange

42533 points +GDP Growth

5.3 %GDP per capita (PPP)$1,629Inflation rate

4.15%Exchange rate with respect to JY = 0.98

Source: Economic Survey of Pakistan:2016-17, Finance Division

8Mineral Resources
ITEMSReserves(Million Tons)

World Ranking

Salt100+

2ndCopper

1,352

3rdCoal (Thar)

175,000

5thIron Ore

430+

5th

22 million
Ounce

5thGold9

International Endorsement

10Bloomburg• 3rd among top ten Best Performing Markets in 2014
• 14th amongst top potential investment locations in2016
Moody’s and Standard & Poor – upgraded Pakistan’s
Economic ratings from stable to positive.
The Economist: Pakistan stands number one in positive
perception change as an investment destination.
JETRO- Ranked Pakistan the best place for theinvestment in terms of returns.
The World Bank – Pakistan world’s least expansivecountry.
OICCI – The Business Confidence Index showing anupward trend.

Agriculture & Livestock

11ITEMSPRODUCTION(Million Tons)

WORLD
RANKING

Cotton10 million bales

4thWheat25

8thRice

7

12th

Milk

43

4th

Meat

3.9

2ndEnergy Resources• 60,000 MW of Hydel Power Potential• 340,000 MW of wind power potential exists,• 300 million barrel of crude oil Reserves,• 26 trillion cubic feet of natural gas reserves• Untapped reserves of 9 billion barrel of shaleoil and 105 trillion cubic feet of shale gas
12• Coal Reserves are 175,000 million tons

INVESTMENT REGIMEOF PAKISTAN

13

INVESTMENT POLICY•

All sectors of economy are open forinvestments
exceptarms&ammunitions, high explosives, radioactive

substances, security printing, currency &mint.
•••

14

Uniform treatment to local and foreign
investments
Up to 100% foreign ownership allowedin manufacturing and social sector
Custom duty exemption on import ofPlant, Machinery & Equipment

INVESTMENT POLICY• Agriculture 60:40• Construction upto 70%,
• Banking/Financial Business upto 49%,
• Media not allowed,• Aviation - only supporting services• Other services sectors 100 %15

INVESTMENT POLICY• 100% repatriation of investment; profitsand dividends• 25% tax relief on initial depreciation onmachinery• Foreign Companies can borrow loans bothfrom local and foreign banks• Setting up Private Limited Company inPakistan - Securities & Exchange Commision ofPakistan under Companies Ordinance 2017.
website: www.secp.gov.pk• Setting up Branch / Liaison offices:website: invest.gov.pk• Work Visa16

Legal Framework17Foreign Private Investment& Protection Act 1976
 Protection to Foreign investment
 Repatriation of investment profits,
re-appropriation of capital, foreign
currency loans and their interest Remittances by foreign employees

18Protection of Economic
Reforms Act 1992
 Immunity to Foreign currency accounts(FCA)
 FCA exempted from wealth tax, income
tax and zakat
 Banks shall keep complete secrecy andnot impose any restriction on FCA.
 Fiscal incentives for investment shall notbe altered to disadvantage of investors.
 Protection against expropriation
19

Other Legal Treaties
Avoidance of Double Taxation
Agreement with 63 Countries

20

Tax Regime in Pakistan
FederalTaxes

CategoryRates

Income Tax

Companies

31%

Banking Companies

35%

On Goods by the Federation

17%

On Services by the Province

16%

General Items

0% - 20%

Auto Sector

35% - 100%

Sales Tax
Custom Duty

21

INVESTMENTTRENDS

22

FDI Inflows – Country wise (Million US$)Country

23

USA
UK
U.A.E
Japan
Hong Kong
Switzerland
Austria
Saudi Arabia
Germany
Korea (South)
Netherlands
Italy
NorwayChinaFrance
TurkeyOthersTotal

2014-15
225.5
264.1
252.6
74.9
138.0
154.2
24.8
68.3
10.5
27.8
18.3
116.4
2.8
1059.3
18.7
49.1
226.7
2,732.0

2015-16
344.8
272.7
240.2
38.2
95.5
88.7
42.7
34.8
16.2
17.0
49.1
110.9
172.5
726.8
97.5
16.6
399.4
2,763.6

2016-17
137
80.4
57.1
49.0
25
32.2
24.3
1.9
44.2
9.4
480.6
5895.41240.3
119
139.6
223.8
2,813.8

USACountry wise FDI 2007-17

China
UK
U.A.E
Hong Kong

17.09

Switzerland

22.26

Italy
Netherlands-1.46Japan-0.280.51

Austria

0.72

15.21

0.84
0.95

Australia
Turkey1.00
1.65

Germany

1.72

Kuwait2.11

France

3.37
11.56

3.50

Korea (South)
Norway

5.45
6.36

7.46

Saudi Arabia
Others24

FDI Inflows – Sector wise (Million US$)

25

SectorOil & Gas Explor.
Financial BusinessTextilesTrade
Construction
Power
Chemicals
Transport
Communications(IT & Telecom)
Food & Food
Processing
Tobacco & Cigarettes
OthersTotal

2014-15 2015-16 2016-17
303.8
266.6 162.2
407.0
391.9 100.3
49.6
25.9
15.9
60.2
43.6
37.4
56.0
50.1
471.8
270.1
809.7 815.2
94.1
106.0
28.9
13.1
83.7
65.7
989.3

397.7

143.4

145.2

75.4

515.4

80.7
262.9
2732.0

195.4
70.7
317.6
223.8
2,763.6 2813.8

Oil & Gas Explor.

Sectors Wise FDI 2007-17

Financial BusinessCommunications(IT&Telecom)
Power

0.73

10.49

1.07
1.45

Food & Beverages

22.40

2.20

Construction
2.65
Trade

2.66
2.87

Chemicals

4.70

Transport

18.70

6.59

Transport Equipement (Auto)
Electronics

11.00

Textiles12.47
Tobacco & Cigarettes

26

OthersPAKISTAN – JAPANBILATERAL TRADE ANDINVESTMENTRELATIONS

27

INVESTMENT RELATIONS WITH JAPAN(US$, Millions)Years
2012-13

FDI Inflow FDI Outflow Total FDI intofrom Japan
to JapanPakistan
33.1
3.0
2099.1

2013-14

46.0

16.0

2665.32014-1574.9

3.8

2732.02015-1638.2

2.8

2,763.6

2016-1749.0

3.9

2,813.8

Source: SBPTRADE RELATIONS WITH JAPAN(US$, Millions)

Trade
Years

Exports

Imports Total Trade
Balance2012-13188.311,430.81

1,619.12( 1,242.5 )2013-14218.91

1,397.75

1,616.66( 1,178.84 )2014-15245.931,401.3

1,647.23(1,155.37

2015-16196.8

1,398.11,594.9(1,201.20)

2016-17204.6

1696.5

1901.1(1491.90)

Export to Japan: Cotton, Textile,Fruits and Vegetables,
Copper waste and scrap,Fish, etc.
Imports from Japan: Automobile, Paper,Iron, Machinery,
Chemicals,
Source: SBP etc.

Priority Sectors for FDI from Japan(Export oriented and value added sectors)• Huge Imports• Skill base
• Tax incentives• Tariff protection• Basic Industry• Huge local
consumption• Tariff Protection•Horizontal and Verticalindustry•Raw material/cheap labor• GSP+ Market AccessSolar panels,Electronics,
Machinery,AutoChemicals,Plastics,Tyres, paper,
oil and gas

TextilesGarments,
Manmadefiber/filament

Iron &Steel
Aluminum &Copper articles• Huge imports• Emerging industry• Boom in domestic
construction 30

PAKISTAN: HOME TO AROUND 1000
MULTINATIONAL BUSINESSES31

Prime Minister’s Office

Board of Investment

Special Economic Zones


SEZs can be developed by: Public sector
 Private sector
 Public-Private Partnership basis
Minimum 50 acres of land-70% area forprocessing and 30% for non processing)

Incentives
Prime Minister’s Office

Board of Investment

One time exemption on import of plantmachinery & equipment
Income tax holidays (5 years for developers
and 10 years or enterprises)
Captive power generation allowed.
One window facilitation.

Prime Minister’s Office

Board of Investment

Prime Minister’s Office

Board of Investment

Potential sites identified for SEZs
S.
No

17

5,349

9
7
4

17,148
7,056
9,105

2.
3.
4.
5.

Gilgit-Baltistan

2450

6.

FATA

1353

7.

AJK
FederalGovernment
Total

4

1,410

2

1,700

46

41,715

8.

Board of Investment

Area (Acres)

Khyber
Pakhtunkhwa
BalochistanSindhPunjab

1.

Prime Minister’s Office

Location

No. ofZone

Functional SEZs - 07
S.
No

Name of SEZ

01.

Khairpur-140
acres, Sindh

Type of Industry
Agro based
processing

Industryanddate

Light Engineering, auto vendors,
Bin Qasim-930
steel fabricating units chemical &02. acres,
PSM,food, pharmaceuticals, electrical &Karachi
consumer goods and furniture.
Consumergoods,food&pharmaceuticals, garments, value
Korangi Creek
03.
added textile, light engineering,
240 – Karachi
packaging & printing, warehouses /logistics
04
Prime Minister’s Office

Board of Investment

Hattar-KPK424 acres

Mining, Marble, Fruit Processing

Automotive Development
Policy - 2016-2021•To attract new investors•To encourage manufacturing of
low price cars

38

Investment Categories
Category-A: Greenfield Investment
Installation of New automotive assemblyand manufacturing plant.
Incentives
 One time basis Duty-free import of Plant &Machinery Import of 100 vehicles in CBU format at 50% of
prevailing duty Custom duty 10% on non-local parts, 25% on
local parts for 5 years (Car, LCVs)
 Import of all parts (5-35%) for 3 years
 Existing policy for Motorbike shall continue.
Prime Minister’s Office

Board of Investment

Investment Categories

Category-B: Brownfield Investment
Revival of an existing assembly and/ormanufacturing plants (non-operational orclosed on or before July 01, 2013)
Incentives
 10% customs duty on import of localizedparts and 25% on non-localized parts for3 years 5% to 35% Custom duty on Imports of allparts.

Prime Minister’s Office

Board of Investment

Investment opportunity in Auto Sector• There is a large demand in the following:– Large domestic demand in small cars ( below 800cc)– Hybrid/electrical vehicles– Motorcycles (above 150 cc)– High tech auto part manufacturing– Large fleet of trucks, prime movers

There is high tariff protection on CBUs toencourage investment
41

WAY FORWARD• Presence of more than 80 Japanese companies• Yamaha Motors, NIPRO Corporation, MarubeniItochu Steel and Ajinomoto Corporation are new• Pakistan needs diversification in exports in thesectors:– Textile Products– Automotive– Steel and Base Metals– Electrical/Mechanical Machinery– Chemicals,Tyres, paper, oil and gas• Japanese companies/ investors can establish
their own exclusive/branded SEZ.

Japanese Investors arewelcome to avail investor
friendly profitable business
opportunities in Pakistan
43Thank you

BOARD OF INVESTMENTPRIME MINISTER’S OFFICE

44