ECC enhances SBP’s powers
A Reuters file image of SBP logo
The Economic Coordination Committee (ECC) of the cabinet has further empowered the State Bank of Pakistan (SBP), which can now allow resident Pakistani companies overseas investment of up to $10 million.
Earlier, the State Bank could authorise resident Pakistani companies investment of up to $5 million in foreign countries. In case of investment of more than $5 million abroad, the SBP had to seek approval of the ECC.
Considering the case of Eastern Products (Pvt) Limited Pakistan in a meeting held last month, the ECC enhanced powers of the central bank for according approval to equity investment abroad by the resident Pakistani companies.
During discussion, Minister for Planning, Development and Special Initiatives Asad Umar noted that at present the State Bank was authorised to approve equity-based investment of up to $5 million abroad by the resident Pakistani companies.
Beyond that ceiling, investment cases were brought to the ECC for consideration and go-ahead.
Umar emphasised that in order to promote ease of doing business, there was a dire need to revise authorisation powers of the central bank and it should be permitted to endorse investment of up to $10 million in foreign countries by Pakistani companies. “The said limit should be reviewed after every five years,” he suggested.
Adviser to Prime Minister on Institutional Reforms Dr Ishrat Husain backed the views of the planning and development minister.
He recalled that the ECC a long time ago, on his recommendation, had authorised the State Bank to allow overseas investment of up to $5 million by the resident Pakistani companies, adding that now the ceiling should be revised. The ECC agreed to the proposal.
The Finance Division sought approval for permitting Eastern Products to remit $6 million for acquiring 50% shares in Sinsina Industrial Works and Metal Construction Company (SIW) in Jubail, Saudi Arabia.
SIW deals in steel fabrication and diversified steel products, catering to needs of oil and gas, petrochemical, power and cement industries. Sources told The Express Tribune that the State Bank endorsed the proposal after carrying out a detailed analysis.
Earlier, Eastern Products approached the SBP through its authorised dealer, seeking the green light for outward remittance of 22.5 million Saudi riyals (around $6 million) for acquiring 50% shares in SIW.
In order to liberalise and deregulate the country’s economy, the federal cabinet, in its meeting on May 16, 2001, had allowed equity-based investment abroad by the resident Pakistani companies on the basis of set criteria.
Under the criteria, cases of private sector would be dealt with by the State Bank and decided by the ECC. The decision was later amended when it was agreed that proposals of up to $5 million would be approved by the State Bank.
SIW had entered into a contract for the sale of 50% shares each to Eastern Products and Sinsina Corner Co for Contracting, Riyadh for a total price of 45 million Saudi riyals.
Eastern Products is mainly engaged in the import, processing, blending, packaging and distribution of tea in Pakistan. Through its sister concerns, Eastern Products also operates in food, agricultural, chemical and personal care segments.
The ECC allowed the company to remit $6 million to Saudi Arabia for investment in the company there.
Published in The Express Tribune, August 16th, 2020.
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