Pakistan’s investment policy has been formulated to create an investor-friendly environment with a focus on further opening up the economy and marketing the potential for foreign direct investment. Various incentives have been offered to attract foreign investment including full repatriation of capital, capital gains, dividends and profits. Furthermore according to various economic commentators, Pakistan has the most liberal investment policy regimes and public-private partnerships in the entire South East Asian region.
The salient features of Pakistan’s Investment Policy are:
• Equal treatment to local and foreign investors.
• All economic sectors open to FDI except a few specified industries like arms and ammunition explosives, radio-active substances, security, currency printing and mint.
• Foreign equity up to 100%allowed for manufacturing, services, infrastructure and social sectors.
• Minimum foreign equity requirement in non-manufacturing sectors (agriculture and infrastructure/social) is USD 0.3 Million. In services sector (including telecom and IT) it is USD 0.5 Million. Manufacturing sector has no minimum foreign investment amount requirement.
• Remittance of royalty, technical and franchise fee, dividends, capital and profits is allowed.
• Import of raw material for export manufacturing zero-rated.
•Tax and tariff incentives package:
- 5% customs duty on import of plant, machinery and equipment for manufacturing, infrastructure and social sectors.
- 0 – 5% customs duty for services sector (including IT and telecom).
- 0% customs duty for agricultural sector.
- No sales tax on import of machinery.
- Tax relief in the shape of initial depreciation allowance has been provided as 50% of machinery costs to all sectors.
• Foreign investment is fully protected by following acts:
i. Foreign private investment (Promotion & Protection) Act, 1976.
ii. Protection of Economic Reforms Act, 1992.