Wise move: Ignoring concerns, ECC places no curbs on investment outflow

Approves hiring of ADB as adviser for TAPI gas pipeline project.

ISLAMABAD: The government has turned down a proposal to impose restrictions on outflow of foreign portfolio investment despite concerns that roughly $3.5 billion could start flowing out of the country because of prevailing volatility in markets, giving much-needed confidence to investors.

The decision to keep the investment policy unchanged was taken here on Wednesday by the Economic Coordination Committee (ECC) of the cabinet, the highest economic policymaking body, chaired by Finance Minister Ishaq Dar.

The ECC arrived at the decision after considering the recommendations made by a sub-committee, headed by State Bank of Pakistan Governor Yaseen Anwar and comprising Board of Investment Chairman Mohammad Zubair and Securities and Exchange Commission of Pakistan acting chairman.



“Any change in the existing law could spark panic among investors,” said Zubair, while talking to The Express Tribune.

He said the government did not want to unnerve the investors, who looked confident due to investor-friendly policies of the PML-N government.

Despite being in an International Monetary Fund (IMF) programme, Pakistan has so far failed to build foreign currency reserves, which currently stand at $4.2 billion, not enough to cover one month of imports. This has caused uncertainty in the market, forcing the policymakers to review the investment regime in a bid to stop a sudden capital flight.

Zubair said the sub-committee reviewed investment statistics of the last four years and noted that there were net inflows.

TAPI adviser

The ECC also decided to hire the Asian Development Bank (ADB) as the transaction adviser for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.

The hiring of the ADB to help generate over $7.5 billion for the US-backed transnational pipeline starting from Turkmenistan is considered an important step towards completion of the crucial energy project.

“Involving a credible financial institution as transaction adviser will ensure greater transparency in the deal,” an official handout quoted Finance Minister Ishaq Dar as saying.

Each of the four countries will pay $5 million in fee to the ADB, which will deal with the company that will lead a consortium of financiers.

No ban on onion, tomato exports

The ECC turned down a proposal of the Ministry of Food Security and Research, which sought a ban on export of tomatoes and onions in order to stem a constant increase in their prices.

The committee termed the proposal impractical and asked the ministry to bring a better and much more practical proposal to arrest the rising prices on a long-term basis.

The committee directed the ministry to keep a close watch over vegetable prices and deferred the matter for the next meeting.

Meeting participants said shortage of both the vegetables was the main cause of increase in prices, which would soon be overcome when fresh stocks of onions and tomatoes reached the markets.

Dar aired concern over inflation and price hike and attributed it to the increase in international fuel prices, according to the handout. However, he preferred not to discuss the impact on inflation of rupee depreciation and printing of new currency notes.

In the first quarter of the current fiscal year, the rupee depreciated by 7% against the US dollar while the central bank printed Rs750 billion worth of fresh currency notes to meet government expenditures.

Energy efficiency audit

The ECC agreed to constitute a committee which will decide whether to carry out energy efficiency audit of captive power plants.

The committee will propose a viable plan for building the capacity of energy efficiency audit programme and to introduce transparency in the system.

The finance minister said the process of conducting energy efficiency assessment of public sector enterprises would be initiated soon.

The meeting also discussed a draft policy for regulation of organisations receiving foreign contributions.

The ECC was told that the draft had been prepared after meeting with all stakeholders and the matter would be brought before the ECC after further consultation with the Law Division in the next two weeks.

Published in The Express Tribune, November 14^th, 2013.

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