2MFY15: Repatriation of profits recorded at $116.6m

Major portion came from the payment of profit on FDI

KARACHI:

Total repatriation of profits on foreign investments amounted to $116.6 million in the first two months of 2014-15, down 3.9% from the corresponding months of the preceding fiscal year, according to the latest data released by the State Bank of Pakistan (SBP).

In August alone, repatriations on foreign investment amounted to $56.4 million, which was down by 36.5% from the corresponding amount repatriated in the same month of the last fiscal year.



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.

Pakistan received direct investment from sources based in foreign countries amounting to Rs87.1 billion during the first two months of 2014-15, which equals 74.7% of the funds that foreign companies repatriated as profits/dividends over the same period.

Profit repatriation in August alone was 89.4% of the foreign direct investment (FDI) of $63.1 million that Pakistan received during the same month.

Net FDI in 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-August came from the payment of profit on FDI as opposed to foreign portfolio investment (FPI). Out of the total repatriation of $116.6 million, profits on FDI constituted about 85.7%, or $100 million, during the first two months 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 two months of 2014-15. With the payment of $46.3 million profits in July-August, the year-on-year increase in the repatriated amount for financial businesses remained 125.8%.

The repatriated profits of the thermal power sector in July-August were $9.9 million, down 71.7% from the corresponding figure recorded at the end of the comparable period of 2013-14.

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 two months of 2013-14.

Other sectors that recorded relatively substantial repatriations in July and August were oil and gas exploration ($13.5 million), cement ($3.7 million) and transport ($7.5 million).

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

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