Pakistan Plans Major Amendments to Protect Foreign Investment in Industrial Sector
ISLAMABAD – The government is set to introduce significant changes to the Protection of Economic Reform Act (PERA) 1992, aimed at safeguarding foreign exchange remitted from abroad when invested in Pakistan’s industrial sector.
The proposed amendments are part of the draft Industrial Policy, which seeks to revive the stagnant industrial sector, boost exportable surpluses, and support sustainable economic growth. The draft policy has already been reviewed by Prime Minister Shehbaz Sharif and focuses on strengthening investor confidence while ensuring the unhindered repatriation of profits. Final approval will depend on discussions with the International Monetary Fund (IMF) due to Pakistan’s ongoing commitments under its program.
Key Proposals:
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A new section in PERA 1992 would prohibit the retrospective withdrawal of fiscal incentives for investments already made. This ensures investors have vested rights and are protected from future policy reversals.
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Amendments to the General Clauses Act, 1897 include a new clause under Section 10A, limiting record retention to ten years, except in cases of ongoing legal proceedings.
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Changes to the Income Tax Ordinance, 2001 would exempt foreign exchange remitted through compliant banking channels from scrutiny under Section 111, provided the funds are invested in industrial or manufacturing projects.
FBR Concerns:
The Federal Board of Revenue (FBR) expressed caution, noting that the proposed exemptions could affect Pakistan’s compliance with FATF regulations and create challenges while under the IMF program. Officials emphasized the need to maintain robust compliance while facilitating genuine foreign investment.
Next Steps:
To address these concerns, the State Bank of Pakistan (SBP) and FBR will collaborate to create a practical mechanism for simplifying income source declarations. This system aims to streamline capital flows for industrial investment without requiring immediate legislative changes.
The amendments are seen as a major step toward boosting investor confidence and encouraging foreign participation in Pakistan’s industrial growth.
