At a time when Pakistan’s economy is in need of foreign capital and investment, a recent letter by foreign investors complaining about how they are being treated by Pakistan is problematic and hurtful.
According to an investigative report in Dawn, the letter was sent by Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of more than 200 largest multinationals operating in Pakistan. The letter written to the prime minister, says that these companies have not been able to send dividends to their overseas shareholders for the last 10 months, which is causing the country a “serious reputational damage.”
Pakistan has historically had a liberal foreign investment policy that allows 100 per cent profit repatriation. Multinational companies repatriated $1.6bn to their overseas headquarters in the calendar year 2021. The repatriated amount dropped to $220.1 million in the first seven months of 2022-23, down 78.3pc from a year ago. The pending dollar dividends amount to more than $1 billion. These outstanding payments were in banking, food, telecom, chemical, power, tobacco, auto and energy exploration sectors.
The letter from OICCI further states “The unremitted local currency dividend is shrinking continuously in the currency of the major shareholders, making the return on investment of foreign investors even less attractive. Many of our members have had to close down, some partially, their manufacturing operations and lay off workers as well. Remaining companies are also finding it difficult to continue to operate. Right now, the confidence of most of the OICCI members is shaken… unless immediate confidence-building measures are taken, there’s a danger of a direct hit to the loss of revenue to the government besides other negative implications to the economy.”
Foreign exchange reserves of Pakistan currently are barely able to cover one month’s import bill which forced the government to stop large dollar outflows, including those by overseas investors. However, this is having a ripple effect in the economy and the government needs to find a way out asap because once foreign investors leave the country, they are not likely to return any time soon.