1MFY15: Repatriation of profits recorded at $60.1m

Data shows 85.5% increase from corresponding period of previous year.

KARACHI: Total repatriation of profits on foreign investments amounted to $60.1 million in the first month of 2014-15, up 85.5% from the corresponding month of the preceding fiscal year, according to data released by the State Bank of Pakistan (SBP) on Tuesday.

In 2013-14, the repatriation of profit from companies operating in Pakistan to their stakeholders based in foreign countries amounted to $1.2 billion, up 12.6% from the repatriation of a little over $1 billion recorded in 2012-13.

It should be noted that direct investment Pakistan received from sources based in foreign countries during the first month of 2014-15 is far less than the amount repatriated as profits/dividends in the same period. Profit repatriation in July was 2.5 times the foreign direct investment (FDI) received during the same month. FDI amounted to $24 million in July, which was 79.8% less than the investment received in July 2013.



Net FDI during 2013-14 was $1.6 billion as opposed to the profit repatriation of $1.2 billion in the same year. The reason for exceptionally high FDI in the last fiscal year was the receipt of the proceeds of the spectrum auction in May.

A major portion of total repatriation recorded in July came from the payment of profit on FDI as opposed to foreign portfolio investment (FPI). Out of the total repatriation of $60.1 million, profits on FDI constituted about 93.6%, or $56.3 million, during the first month of the current fiscal year.

Pakistan allows 100% foreign ownership of businesses and unrestricted repatriation of profits to encourage investment in the country. The repatriation of profits can be in the form of either dividends or liquidation of foreign holding.

Financial businesses repatriated the largest amount to their stakeholders in foreign countries in the first month of 2014-15. With the payment of $23.5 million profits in July, the year-on-year increase in the repatriated amount for financial businesses remained 155.4%.

The repatriated profits of the thermal power sector in July were $9.3 million, up 82.3% from the corresponding figure recorded at the end of the comparable month of 2013-14. Similarly, the transport equipment sector -- particularly cars, buses, trucks, vans and trailers -- repatriated a total profit of $9.4 million in July, which was 261.5% higher than the corresponding month of 2013-14.

Other sectors that recorded relatively substantial repatriations in July were oil and gas exploration ($2.6 million), cement ($3.5 million) and transport ($6.5 million).

Published in The Express Tribune, August 27^th, 2014.

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