Security clearance procedure relaxed for foreign investors

SECP to take on responsibility of registering foreigners.

ISLAMABAD:

The policy of obtaining a prior security clearance for companies seeking incorporation with foreign investment in Pakistan, or foreigners intending to invest in local companies, has been relaxed by the interior ministry.

Foreign investors are currently required to obtain security clearance from the Ministry of Interior before starting their businesses in Pakistan, and delays in obtaining clearance are considered a major discouraging factor for foreign investment.

The ministry changed the policy on the recommendations of the Securities and Exchange Commission of Pakistan (SECP). Obtaining security clearance no longer remains a prerequisite for the registration of companies having foreign investment and foreign directors.

According to the new policy, the SECP will issue a certificate of registration to foreign investors, which will be subject to clearance from the ministry. The SECP will also approve the appointments of foreign directors on the boards of companies. The appointments will also be subject to the provision of a security clearance certificate from the ministry.

The SECP has clarified in a statement that it reserves the right to cancel the registration of a foreign company or the appointment of a foreigner director in case the Ministry of Interior does not issue a security clearance for the director or company concerned after its registration.

It will be mandatory for foreigners to file all relevant documents necessary for security clearance along with the undertaking that, in case of refusal of security clearance, the already recorded returns shall be de-registered and the directors shall be replaced.

It has also been decided that the SECP—in consultation with other stakeholders —shall finalise a list of countries whose nationals can be considered for exemption from the requirement of security clearance. The security clearance requirement at the moment applies to all foreigners serving as directors of companies operating in Pakistan.

It is expected that the decision will not only increase foreign direct investment (FDI) in Pakistan, but also increase the level of trust of foreigners in the country. FDI is vital for the healthy growth of economy and will be instrumental in restoring the investment-friendly reputation of Pakistan. Besides, there will be no bar on non-resident Pakistanis to work on boards of directors of local and foreign companies in Pakistan.

Published in The Express Tribune, March 13^th, 2013.

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