Lucky Cement has been allowed to purchase $40 million from the interbank market for setting up a cement manufacturing plant in Congo. PHOTO: FILE
The government has bound Lucky Cement to send 100% dividends back home from its $40 million equity investment in Congo, which is being met from the interbank market, sources say.
To ensure that all dividends are repatriated to Pakistan, the State Bank of Pakistan (SBP) will keep a close watch on the movement of money.
Lucky Cement has been allowed to purchase $40 million from the interbank market for setting up a cement manufacturing plant in Congo, a step that comes at a time when Pakistan’s foreign currency reserves are already under strain.
According to sources, the government changed its stance following an earlier decision of the Economic Coordination Committee (ECC) in March 2013, which had asked Lucky Cement, the largest cement manufacturer in the country, to arrange foreign exchange for investment in Congo from the open market.
The new decision about purchase of $40 million from the interbank market and 100% repatriation of dividends came in an ECC meeting held on January 8 this year.
The ECC was told that the State Bank of Pakistan (SBP) had proposed remittance of $40 million for investment in Congo through incorporation of a joint venture company under the corporate umbrella of Democratic Republic of Congo.
In response to a summary submitted by the Finance Division, the ECC approved the proposal with the directive that the SBP would monitor the transfer of foreign exchange.
It was also pointed out in the meeting that purchase of dollars from the open market on a quarterly basis was not in line with the SBP’s regulations according to which corporate bodies could not generate funds from the open market.
Assessing the new proposed investment structure, the central bank recommended that Lucky Cement should be allowed to send $40 million from the interbank market on account of equity investment in Congo.
The amount would be made available in quarterly installments of $10 million each depending on the condition that the SBP would ensure that 100% dividends were sent back home.
The ECC agreed that SBP comments in the context of equity investment in Congo and establishment of a cement manufacturing plant were quite valid and criteria developed earlier for allowing investment abroad by resident Pakistanis or companies were reasonable.
However, there should be a strong mechanism to ensure full repatriation of dividends from such investments.
Published in The Express Tribune, January 19th, 2014.
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COMMENTS (9)
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@usman786: Lucky is owned by Yunus Brothers Group. www.yunusbrothersgroup.com
The only way that feudals, landowners, aristocrats will pay taxes is if a military regime sends soldiers to their luxurious villas and makes them pay or seizes/ sells their assets. ( a tax lien).
The GoP/MoF is struggling to keep the value of PKR stable hence the pressure on Lucky Cement to repatriate 100 percent dividends. The monies were arranged by Lucky through the interbank market and being monitored by the SBP. Nothing wrong with that. But Pakistan needs to pull up its socks after sixty-six years of independence. Has any body given a thought to the tax collection drive initiated late last year and why it fizzled out? Salams
I suppose sovereign guarantee of GoP is the interfering factor.
@unlucky indeed I wish you had ever studied economics(macro)
The owners of lucky cement should forget the deal with government. Just buy from open market by transferring rupees to usa or europe. Economic disaster.
Warning to other companies to not try to do things the legal way.
It is their money. They should be allowed to do what they like with it. Govt. interfering in the affairs of a private company!