Bailout: Pakistan thanks Saudi Arabia, UAE, China for support ahead of IMF meeting today

ISLAMABAD: The Pakistan Tax Bar Association (PTBA) has written a letter to the interior minister this week raising concern about the ‘unilateral’ rejection of security clearances for foreign investors, which the union said could jeopardize their business activities in the country.

The government of Prime Minister Shehbaz Sharif says it is committed to improving Pakistan’s investment climate as the South Asian country struggles to meet external financing needs. In 2023, Pakistan set up the Special Investment Facilitation Council to attract foreign funds and projects. In recent months, Saudi Arabia has promised to expedite a $5 billion investment plan for Pakistan, while the UAE and Kuwait have committed $10 billion each in promising sectors and Qatar has pledged $3 billion.

However, potential investors in Pakistan face many challenges such as taxation, persistently high inflation, red tape, weak rule-of-law, inconsistent regulation, corruption, political uncertainty, security concerns and a lack of transparency in public-sector decision-making.

“We are writing to you to raise a very serious issue in terms of rejection of security clearance for foreign investors who have incorporated a 100 percent foreign equity company in Pakistan,” the PTBA, a private body, said in the letter to Interior Minister Mohsin Naqvi on Wednesday. 

As per the Companies Regulations, 2024, every foreign subscriber and director is required to seek security clearance by filing required documents to the interior ministry through the Securities and Exchange Commission of Pakistan. After the incorporation, companies start their investments and set up their premises and factories to commence business operations in Pakistan. 

“Nowadays, companies have been receiving unilateral rejection letters from the SECP, informing them that the security clearance for their foreign subscribers and directors have been rejected,” the PTB said. “These letters neither specify the reasons for such rejection nor any opportunity of hearing to explain the defects/discrepancy if any.”

The union said these actions were sending a “very negative message” to foreign investors.

“Pakistan and one fine morning they are informed that they are not security cleared,” PTBA said. “This jeopardizes their entire business set up in Pakistan, which is against the government’s stated aim of inviting foreign investors to invest in Pakistan.”

The PTBA urged Naqvi to “immediately” address the issue, which was “adversely” affecting Pakistan’s ability to attract foreign investment.

The interior ministry has not yet commented on the PTBA’s letter.

Pakistan in 2023 nearly defaulted on the payment of foreign debts when the International Monetary Fund rescued it by agreeing to a $3 billion bailout to Pakistan. 

Last year, Islamabad secured a new $7 billion loan deal from the IMF. Since then, the country’s economy has started improving with weekly inflation coming down from 27 percent in 2023 to 1.8 percent earlier this month. Sharif has vowed to reduce dependence on foreign loans in the coming years and to seek more foreign investments.

ISLAMABAD: Pakistani Defense Minister Khawaja Asif said on Friday Islamabad and Baku were in the process of finalizing a memorandum of agreement to enhance security ties through cooperation in arms trade, defense infrastructure and intelligence sharing.

Asif was addressing the eighth session of the Pakistan-Azerbaijan joint commission alongside Azerbaijani Defense Industry Minister Vugar Mustafayev who is visiting Islamabad. 

There have been a series of visits by Azerbaijani officials to Pakistan in recent months, as Islamabad seeks closer ties, especially in trade and investment, with former Soviet republics and Central Asian states. 

Last July, Azerbaijan President Ilham Aliyev visited Pakistan and announced that the two nations were working to increase bilateral trade to $2 billion.

“I’m hopeful that once we finalize our memorandums of understanding on cooperation in the field of the defense industry, we will be able to further our security ties through arms trade, defense infrastructure and sharing of intelligence,” Asif said. 

He invited Azerbaijan to join Pakistan’s Strategic Underground Gas Storage (SUGS), a critical component of energy infrastructure, and the White Oil Pipeline project that transports oil from ports to refineries and other distribution points.

Asif also suggested organizing regular trade exhibitions between the two countries to showcase local products in each other’s markets.

Last December, Pakistan waived customs and regulatory duties on imports from Azerbaijan under the Pakistan-Azerbaijan Preferential Trade Agreement. The agreement aimed to boost economic cooperation by reducing tariffs on goods like Pakistan’s sports equipment, leather, and pharmaceuticals and Azerbaijan’s oil and gas products.