The Board of Investment Pakistan is the country’s premier investment promotion agency. It works under the administrative control of the Prime Minister’s Office to attract foreign and local investment. A member of the World Association of Investment Promotion Agencies, the Board promotes and facilitates investment in Pakistan. The Board also assists foreign investors with investment projects.
Business climate in Pakistan
In the latest ranking by the World Bank, Pakistan has made a strong showing amongst countries with the best business climate. It has climbed from 136th place to 108th, an improvement of two spots. The report is based on the Ease of Doing Business index, which measures how easy it is for businesses to do business in a country.
Pakistan has made a concerted effort to liberalise trade and increase private sector development, but still faces challenges. For example, poor legal enforcement and weak property rights are stifling investment and limiting productivity. Also, red tape and corruption are high. Physical infrastructure needs to be improved, and regulatory frameworks in many sectors should be streamlined.
A recent survey by the Overseas Investors’ Chamber of Commerce and Industry (OICCI) shows that the business environment in Pakistan is improving. The OICCI, a non-profit organization that represents over 195 multinational companies in Pakistan, found that 82% of respondents expected continued growth and continued investment in the country. However, some issues related to doing business in Pakistan remain, and more support from government ministries is needed.
The Government of Pakistan offers special incentives for export-oriented companies. In addition to offering a tax holiday of 10 years, it provides streamlined utilities connections and one-time waiver on import duties on plant materials. However, some SEZs have struggled to attract investment because of the lack of basic infrastructure. To address this, the Peshawar Economic Zone Office plans to open an Industrial Facilitation Center (IFC) in 2020.
The STPF 2020-2025 framework was approved by the Prime Minister and implemented in 2014. In addition, the government has introduced sectoral policies that provide additional incentives to investors. These policies include the Automotive Policy 2016 and the Electric Vehicle Policy 2020-2025. They usually include tax breaks, tax refunds, and investor facilitation services.
While the Pakistani government has the primary responsibility for setting rules, subnational governments play a key role in the industry. The government also allows private sector associations and non-government actors to provide feedback on regulations and policies. However, these organizations are not legally bound to implement the feedback. The regulatory authorities are also required to conduct in-house post-implementation reviews.
SOEs in Pakistan
The history of SOEs in Pakistan is a mixed one. While most SOEs have underperformed compared to other sectors, some have flourished and performed very well. Some, however, have struggled with financing and regulation. There has also been a tendency for SOEs to be governed by special interests rather than by business imperatives.
The government is also trying to reform SOEs that have significant fiscal losses. These include power production and the railways. The government has made some progress in the power sector, but plans to turn its attention to the railways in the coming year. The reform process must include the separation of ownership and governance in SOEs.
SOEs in Pakistan contribute 10 percent to GDP and employ 0.5 million people. They also have a 28 percent market capitalization. However, SOEs have been losing money – the State Bank of Pakistan estimates that they are costing the country around Rs. 1.3 trillion per year. The losses from SOEs are also a major concern for budgetary allocations. According to the latest figures, the government and SOEs in Pakistan had net liabilities amounting to nearly 12 percent of GDP in 2017.
Despite the growing debt ratio and general fiscal stress, the banking sector in Pakistan is performing well. International lenders and banks have commended the country’s financial sector. The SBP’s latest review of the banking sector published in July 2020 indicated that the sector’s asset base has expanded by 7.8 percent since the end of 2013. Banks’ investments have increased by 2 trillion dollars, with five largest banks controlling over 50 percent of the country’s assets.
Foreign investors may invest in most types of businesses in Pakistan. However, foreign investors are not allowed to own and control high explosives, radioactive substances, or other sectors that are deemed dangerous for public safety. In the services sector, foreign investors may retain 100 percent of the shares. However, they must obtain permission from the relevant agency and meet the requirements of their sectoral policy.
Tax regulations in Pakistan
The income tax law in Pakistan defines the basic rules for the taxation system. According to the law, all incomes that are not exempt from the tax have to be reported to the appropriate tax authorities. The Federal Board of Revenue has the responsibility of regulating the taxation system in Pakistan. The filing of tax returns is mandatory, and NTN registration is required to document the income tax returns.
The standard rate for sales tax in Pakistan is 17%. The tax is due on supplies of goods and services in Pakistan, and on the importation of goods and services. Nonresidents are allowed to apply for advance rulings about the tax implications of their transactions. The amount of sales tax due depends on the type of business or activity.
Nonresidents are subject to a ten percent withholding tax. This tax applies to money transfer operations, card network services, payment gateway services, and interbank financial telecommunications services. Under the new finance act, banks and exchange companies must be licensed by the State Bank of Pakistan before they can offer these services.
In Pakistan, the Income Tax Ordinance 2001 governs the taxation system. This law has been amended from time to time. Sales tax in Pakistan is governed by the Sales Tax Act 1990. However, sales tax on services is a provincial subject. The sale tax law is not examined in Paper F6 (PKN) exam, but ACCA has issued guidelines for students studying for the exam.
In addition, the taxation of income from property has changed. Depending on the type of property owned, individuals and businesses can claim an allowance up to one fifth of gross rent. They can also claim rent collection charges up to six percent of gross rent. In addition, the government allows for the deduction of ground rent if the property belongs to another person.
IPO Policy Board meetings in Pakistan
The Chairman and the Secretary General of IPO were absent at the recent meeting. The Chairman claims that the IPO management had destroyed the minutes of the previous Board meeting, which were signed by the ex-Chairman. In fact, the Director General was the one who sent the draft minutes to the Chairman, but the chairman disregarded them and circulated his own minutes.
The meeting also addressed the issue of outstanding payments to Chinese IPPs in Pakistan. The Finance Minister assured the Chinese IPPs that he would look into the matter immediately. The meeting also discussed the modalities for facilitating the business community and boosting exports. The meeting was attended by the Federal Minister for Finance and Revenue.
The IPO Pakistan’s mandate is to protect, promote, and resolve IP in Pakistan. As such, it is crucial for stakeholders to embrace its role as an agent of change in the IP landscape in the country. It is an independent body, with an independent budget, and has the power to issue directives. This means that it can change the way the government deals with IPRs. In fact, the IPO Pakistan’s role could be a catalyst for a paradigm shift in the enforcement of IPRs in Pakistan.
The UAE’s economic delegation also expressed its appreciation for the Pakistani government’s commitment to the foreign investment sector. The economic team also discussed various issues of mutual concern, including the economy, energy, and other fields of cooperation. Pakistani Finance Minister Mr. Miftah Ismail explained Pakistan’s investment-friendly policies and assured the UAE of full cooperation.
