ISLAMABAD:
The government is set to introduce a legally secure framework to empower the Prime Minister’s Office to issue directives for the protection of foreign direct investment (FDI) and investors, aimed at preventing undue interference by the NAB and FIA, under the new proposed National Industrial Policy.
The government also plans to set up the National Industrial Revival Commission (NIRC), which will prevent investigation agencies from taking action against companies when proceedings are taking place in the commission.
Sources said that the government would ensure the new industrial policy included provisions allowing the PM’s Office to issue directives, if deemed necessary, for the protection of FDI and investors. A foreign investor is a foreign company or any natural person who is not a citizen of Pakistan and also a person holding the National Identity Card for Overseas Pakistanis (NICOP).
No coercive action would be initiated against any foreign investor in respect of any regulated activity or regulated securities’ activity without prior approval from the PM Office or any other office, organisation or agency notified under the new industrial policy, sources told The Express Tribune. The objective was to provide a secure legal cover to the foreign investors, they added.
In this regard, according to sources, amendments have already been prepared and agreed with the Securities and Exchange Commission of Pakistan (SECP) to prevent undue interference by authorities such as the Federal Board of Revenue (FBR), the National Accountability Bureau (NAB) and the Federal Investigation Agency (FIA).
New provisions are supplemental to the existing laws, rules or regulations relating to the protection of foreign investment.
Sources said that the proposed amendment would prevent harassment of regulated persons and foreign investors engaged in legitimate business, thereby encouraging capital market development. A penal provision has been incorporated into the new industrial policy to ensure compliance and enforceability, deterring unauthorised or unlawful interference in matters that fall within the domain of NIRC.
No authority may take any action that impairs or is likely to impair or disrupt regulated activities or business operations of entities mentioned in sub-section (1), including seizure of property or records, sealing of premises or arrest of personnel.
Cases pending before any court having jurisdiction before the commencement of this Amendment Act shall continue to be prosecuted without reference from the commission, sources say, adding that any person who contravenes this section shall be guilty of an offence punishable with simple imprisonment of 30 days or a fine of up to Rs1 million by the court.
The existing systems and legal architecture allow discretion that leads to over-interference and undue punitive or coercive behaviour, which undermines investor confidence and affects growth. The proposal recommends developing and applying favourable instruments under the Anti-Money Laundering Act 2010.
The national anti-money laundering and countering financing of terrorism (AML/CFT) framework should create policy and operational safeguards to protect customer rights and regulated entities while limiting undue enforcement powers in the absence of substantiated grounds. Amendments to Section 41B and Section 42A of the SECP Act 1947 are proposed, along with mandatory SECP approval before law enforcement actions.
The enhancement of Export Financing Surcharge (EFS) utilisation has also been recommended, requiring banks to justify refusals and consider a reduction in rates.
Exporter credit framework should permit B2B Letters of Credit, invoice-backed financing and credit risk insurance, while eliminating personal guarantees of directors. Lending incentives may include reducing the capital adequacy risk weight for medium-sized firms from 75% to 50%. Sector-specific bonds or instruments similar to National Investment Trust (NIT) bonds should be introduced to enable long-term financing by development finance institutions (DFIs) and commercial banks.
Additional proposals include improved access to digital payment gateways, a strengthened venture capital ecosystem, easier reinsurance procurement for Exim Bank and revival of the debt resolution framework for sick industrial units, drafted with the State Bank. Corporate restructuring companies can also be enabled to acquire non-performing loans and manage firm recovery.
