UK, US firms lead in profit repatriation

UK and US-based companies, operating mainly in the oil and gas exploration and financial sectors in Pakistan, remained on top in repatriating profit to their headquarters in first two months (July-August) of the current fiscal year.

UK-based firms repatriated the largest amount of $197.8 million in the two months, followed by US companies, which sent home $57.8 million, the State Bank of Pakistan (SBP) reported on Tuesday.

Companies of the two countries had also remained on top in profit repatriation in the same two months of the previous fiscal year. In that period, UK-based companies repatriated profit worth $48.9 million while US firms sent home $41.6 million.

SBP Deputy Governor Dr Murtaza Syed said last week (September 21) that the United Kingdom and the United States were the top two sources of foreign direct investment (FDI) in Pakistan.

Companies belonging to the two countries mainly invest in oil and gas exploration and financial sectors.

Besides, China-based firms were the leading investors in the power sector of Pakistan, he said while commenting on FDI flow to different sectors of the economy at a press conference on the monetary policy statement.

Breakdown of data suggests foreign firms operating in the financial sector repatriated profit amounting to $90 million in July-August FY21, which was almost three times the profit of $31.4 million sent home in the corresponding two months of previous year.

Profit from the oil and gas exploration sector, however, dropped to less than half at $19.3 million compared to $42.2 million last year, according to the central bank.

Topline Research said earnings of oil and gas exploration firms listed at the Pakistan Stock Exchange (PSX) dropped 40% in the fourth quarter (April-June) of previous fiscal year due to "lower oil prices and Covid-19-hit earnings".

The sector's sales revenue during the quarter declined due to 61% year-on-year fall in the average Arab Light oil price to $27 per barrel compared to $69 per barrel in 4QFY19 and $54 per barrel in 3QFY20.

"Similarly, oil and gas production…fell in the range of 1-37% year-on-year in 4QFY20 due to the Covid-19 outbreak as refineries' output remained on the lower side, thus impacting exploration and production offtake," it said.

Malta emerged as the third top country in profit outflow from Pakistan. It received profit worth $47.1 million in July-August FY21 compared to zero in the same two months of previous year.

Besides, Switzerland received profit worth $18.1 million from its companies based in Pakistan and Hong Kong-based firms repatriated $17.5 million to their headquarters.

In total, multinational companies (MNCs) repatriated profit worth $407.6 million to their headquarters in first two months of current fiscal year 2020-21. They dispatched the profit earned on investment in different sectors of the economy and the PSX.

The profit repatriation was approximately 90% higher compared with $214.7 million in the same two months of previous year, the SBP reported.

Data breakdown suggests foreign firms repatriated $391.7 million earned from long-term FDI in different sectors like oil and gas exploration, communication and power.

Besides, they sent home profit worth $15.9 million earned on investment in shares at the Pakistan bourse.

The profit repatriation includes $99.1 million from the food sector, $90 million from financial business, $65.7 million from the telecommunication sector and $48.4 million from the tobacco and cigarettes sector.

Published in The Express Tribune, September 30^th, 2020.

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