China seeks end to foreign exchange controls

Insists businesses in Gwadar should be allowed to maintain dollar, RMB accounts

ISLAMABAD:

China has requested Pakistan to initiate a pilot project for exempting settlement in Chinese renminbi (RMB) currency for export-oriented enterprises in the Gwadar Free Zone, which will give a boost to foreign investment.

It has also proposed that businesses in the free zone should be allowed to maintain US dollar or RMB accounts without foreign exchange controls to facilitate smooth remittances of profit.

Sources said that Chinese firms were seeking exemption from the Foreign Exchange Regulation Act 1947 for RMB settlement as a pilot project in the Gwadar Free Zone.

The issue was taken up in a recent meeting of the Cabinet Committee on Chinese Investment Projects (CCOCIP).

CCOCIP was briefed that China Overseas Ports Holding Company (COPHC) had requested the State Bank of Pakistan (SBP) to initiate a pilot project for RMB currency exemption by targeting export-oriented enterprises in the Gwadar Free Zone. The objective is to boost foreign investment and further develop the free zone. COPHC also proposed that businesses in the free zone should be allowed to maintain US dollar or RMB accounts without foreign exchange controls to facilitate smooth profit remittance, creating a more attractive environment for investors.

During discussions, the cabinet committee directed the Ministry of Maritime Affairs to submit a summary after seeking comments from the FBR, SBP, the Commerce Division and the Finance Division.

Seafood transshipment via Gwadar

CCOCIP was informed that COPHC had requested permission to handle seafood transshipments from international waters at Gwadar Port. The initiative is aimed at creating a favourable environment for the transshipment of fish caught in international waters via Gwadar Port.

During deliberations, the cabinet committee inquired about how the activities of ships would be monitored in international waters. It emphasised that fishing was a sensitive issue in Balochistan and directed that the provincial government be consulted before bringing the matter to the committee.

Additionally, the CCOCIP gave directives that a well-thought-out proposal be drawn up in consultation with the provincial government and other relevant stakeholders by the Ministry of Maritime Affairs, which should then be presented to the cabinet committee in the form of a summary in the next meeting.

Karachi Coastal Zone

CCOCIP was briefed that an investment framework agreement had been signed between Karachi Port Trust (KPT) and China Road and Bridge Corporation (CRBC), a Chinese state-owned enterprise, in July 2023.

CRBC has shared a draft joint venture agreement and concession agreement with KPT and the Ministry of Maritime Affairs for signing and it is being reviewed for some time.

CCOCIP noted practical difficulties in the case of reclaimed coastal land, which, according to a court judgement, became a provincial property. Therefore, the provincial government needs to be brought on board.

The Ministry of Maritime Affairs was directed to consult the chief secretary on that important issue and inform the CCOCIP in its next meeting, through a summary, about the way forward.

CCOCIP was also informed that Chinese nationals working on various projects in Pakistan had consistently requested for convenient and flexible standard operating procedures (SOPs) for their security. SOPs should ensure foolproof security while allowing them to conduct their business with ease, the meeting was told.

It was pointed out that Chinese experts had recently visited Pakistan and underscored the security concerns as a significant hindrance to attracting Chinese investment into the country.

The government of Pakistan has been assuring the Chinese government that it is working on a foolproof security mechanism for the Chinese nationals.

The government of Pakistan believes that some rival countries are involved in sabotaging the security situation in Balochistan to derail work on China-Pakistan Economic Corridor (CPEC) projects.

Of late, the government has taken a decision to shift 60% of shipments from Karachi to Gwadar Port to make the latter fully functional.