A Handbook For Doing

Business In Sindh
Sindh, with its numerous competitive advantages, becomes an
obvious choice for investors. Sindhs wealth of natural resources, its
strategic location and its well developed industrial, nancial and
telecommunication sectors have all the ingredients for a successful
business venture.

Karachi has been the focus of investors interest, who have been
attracted to its vibrant economy and enormous business potential.
The scope for coastal recreation resorts, construction and housing
especially in low cost sector, IT parks, modern municipal
management, mass transit and in relocation of textile and other
industrial setups from developed economies make it an ideal
destination for investors.
Dr. Ishrat Ul Ebad Khan
Governor Sindh
The endeavour by Sindh Board of Investment to showcase Sindhs
potential for investment particularly in rural economy, would help in
fulling governments commitment to provide equitable
development in all parts of the province.

Sindh, by the grace of Allah, will continue to be the major

contributor in national revenues.
Sindh Government attaches high priority to Investment facilitation
which it believes would take the Province to path of the progress
where it achieves its true economic potential. The creation of Sindh
Board of Investment is the manifestation of Sindh Governments
commitment to bring about continuous improvement in the
investment climate in the province. SBI is tasked to develop
investment opportunities for large, medium and small investors,
which will include technical assistance in conducting market
research and feasibility studies.

Sindh has been successful in signing the biggest joint venture

project in the countrys history where the provincial government will
invest with a private sector company on a US$ 1 billion coal mining
project. Sindh Assembly has provided legal structure for Public
Private collaboration by enacting Sindh Public Private Partnership Chief Minister Sindh &
Act 2010. M/s Deokjae Construction Company of Korea has already Chairman, Sindh Board of
Investment
started work on the first PPP road project, Hyderabad-Mirpurkhas
Dual Carriageway.

Sindh Development Fund is another unique initiative whereby the

government will provide subsidy to the private sector initiatives for
value addition in agro-processing, fisheries, livestock and dairy
sectors.

The Government of Sindh is actively pursuing its goal to bring

prosperity to its people by creating jobs and economic opportunities
by facilitating investment and business.
Nature has blessed Sindh Province with ideal climate suitable for
growing wide range of crops, fruits, minerals and man-power resources.
Government policies are conducive with the emphasis on promotional
activities to facilitate the establishment of new industries and their
smooth growth & operation.

Pakistans Investment policy is the most liberal in the region, and opens
new vistas to local as well as foreign investors for investment in service,
social, agriculture and industrial sectors so as to keep Pakistan
competitive in international market and viable area of investment.
Under the Investment Policy in vogue no permission is required to invest
in Pakistan. A foreign investor can hold up to 100 percent of equity.
Remittance of profit, dividend, and capital is allowed among many other
facilities available in the policy.
Saleem.H Mandviwalla
Pakistan a home to over 700 multinational companies, which shows the Minister of State / Chairman,
confidence of investors in Pakistan. Due to consistent Prime Ministers Secretariat (Public),
economic/investment policies, international studies & surveys has Board of Investment
ranked Pakistan better than India, China, Srilanka, Bangladesh etc with
respect to: ease of doing business.

Pakistan being one of the fastest growing economies of the world

having touched a GDP growth rate of 8.4% in 2005. Today Pakistan has
over 170 million consumers with an ever growing middle class. Foreign
Direct investment has risen sharply from an average of $300 million in
the 1990s to over $3.7 billion in 2008-09. Fiscal decit has declined from
an average 7% of GDP in the 1990s to around 3% in recent years. FOREX
reserves have increased from $ 3.22 billion in 2000-01 to $11.6 billion in
June 2009 and are increasing further.
Sindh is the most resilient and attractive investment destination for international
and local investors. With Karachi-the financial capital of Pakistan, being
nucleus of headquarters of major banks, financial institutions and business
houses, having large agricultural, industrial and aqua culture base as well as
emerging opportunities in energy sector provides the province
with unmatched competitive advantage to attract investment. In order to
capitalize on this competitive advantage Sindh Board of Investment (SBI) has
been established to strengthen business friendly environment in the province
with efficient mechanisms of governance to enhance comfort level of the
investors by acting as a bridge between the Government & the business
community.

SBI has tried to change the orthodox way to attract investment by offering the
potential investor viable projects with complete technological knowledge.
Through Sindh Development Fund government of Sindh has established a
credit assistance window where the idea is to work closely with financial
institutions and subsidize the interest rates for attracting investment in agro Mr. Mohammad Zubair Motiwala
based industries to support rural economy of the Province. The commencement Advisor to CM
of mega projects like Education City, Special Economic Zone, Textile City, Sindh Board of Investment
Marble City, Khairpur Special Economic Zone will provide immense
employment opportunities and usher a new era of economic activity in the
province.

With prudent policies of the Government, new investment opportunities are

emerging in Sindh everyday making it a top choice for foreign and local
investment including relocation of industries from the developed economies.

SBI hopes you will join thousands of investors already benefiting from
investment in Sindh as we oer a winning combination of benefits and
opportunities to be your preferred investment destination.
Sindh Board of Investment presents its yet another
milestone publication. This handbook is the first attempt
on the part of SBI to bring a gist of some useful policy
papers in one volume.

There was a constant demand from our investors and

their facilitating investment institutions in various fields for
information on governments policies and regulatory
framework. We have tried to gather some useful pieces of
such information which may be of relevance to all kinds of
investment related decision making.
We also place on record our acknowledgement of having
benefitted from the following work done in this area:
Mr. Mohammad Younus Dagha
Secretary
i) Investor Resource Guide, Pakistan Board of Investment Sindh Board of Investment
ii) Investment in Pakistan 2010, KPMG

It is admittedly not perfect yet and will require continuous

updating and improvement, which is only possible through
your valuable comments.
LAND OF ENDLESS
OPPORTUNITIES
Pakistan - Compared to global good practice economy as well as selected
economies:
 To develop and promote an investment
friendly environment that boosts economic
activity, brings value addition to all sectors of
economy and encourages public private
partnership for socio-economic development
of Sindh
 Act as the Focal Point for all Investment related activities in the Province

Provide Framework for implementation of Investment Policy of the Federal Government and to
support provincial endeavors

Investment Protection by looking after legitimate interests of business / investors community

Provide alternate dispute resolution mechanism for cases / prosecution initiated against
members of trade and industry under various commercial, industrial, labor and taxation laws
enforced by the Provincial Departments

Suggest improvements in regulatory framework and procedural systems for Trade and Industrial
activities in the Province

Provide platform for Public Private interaction and promotion of Public Private Partnerships

Provide One Window system at the Provincial level for facilitation of local and foreign investors
seeking land, approvals, concessions, facilities and support from the Provincial Departments and
authorities
 A Snapshot of Sindh
Sindhs Competitive Advantages
Investment Policy and Incentives
Other Policies & Legislations
Sectoral Policies
Agriculture
Automobile Sector
Cement
Energy (Power, Oil & Gas)
Fertilizer Sector
Financial Services
IT & Telecom
Minerals
Pharmaceuticals
Textiles
Mergers & Acquisitions
Foreign Exchange
Appendix I - Company Laws
Appendix II Other Legislations
Appendix III Labour Laws
Appendix IV International Agreements
Appendix V Important Contacts
 Area: 140,914 Sq. Km
Population: 35,470,648
Coast line: 350 Km Long
Government Type: Provincial
Capital: Karachi
 Coastline 350 KMs
Two Major Ports
Port Qasim
Multipurpose Terminal,
Container Terminal, Liquid
Chemical Terminal & Oil
Terminal
Karachi Port
Container Terminals, Bulk
Cargo Terminals, Oil Piers,
Ship Repair Jetties and
Shipyard & Engineering
Facility
Huge potential for
Aquaculture
 SINDH - Regional Power
House of the Future
Thar Coal potential for
200,000 MW for 300 Years
Wind Corridor 50,000 MW
potential
Oil 56% of countrys
production
Gas 71% of countrys
production
 Wide network of
Industrial Estate
SITE Limited (Sukkur,
Benazirabad, Nooriabad,
Hyderabad & Karachi)
Korangi Industrial Area
NIP (Bin Qasim & Korangi
Industrial Parks)
Export Processing Zone (EPZ)
Karachi
Port Qasim Industrial Area

Trained, Educated &

Affordable workforce
 Airports
Jinnah International Airport
Four domestic airports (Hyderabad,
Benazirabad, Sukkur & Larkana)
Airstrips at several locations

Large Agricultural,
Industrial & Aquaculture
base
Agriculture 23% of GDP
contribution
34% of Total LSM in Pakistan
LSM in Sindh contribute 43% to GDP
SSM in Sindh contribute 25% to GDP
 Almost all economic sectors open to foreign investors
Foreign equity up to 100% allowed
No Government permissions required
Attractive incentives package
Remittance of capital, profits, royalty, technical & franchise fee
allowed
Equal treatment of local & foreign investors
Network of Export Processing Zones / Industrial Estates
Import of raw material for export manufacturing zero-rated
Attractive incentive packages
0-5% customs duty on import of machinery
No sales tax on import of machinery
No withholding tax on import of machinery
 Foreign investment is fully protected by following Acts

Foreign Private Investment (promotion & Protection) Act,1976

Protection of Economic Reforms Act, 1992

Bilateral Agreements

Investment Protection 47 countries (Appendix IV)

Avoidance of Double Taxation 52 (Appendix IV)
 Policy Parameters Manufacturing Sector Non-manufacturing sectors
Agriculture Infrastructure and Services
Social
Government permission Not required except for Not required except licenses from concerned agencies
specific industries [1]
Remittance of capital, profits, Allowed Allowed Allowed Allowed
dividends etc.
Upper limit of foreign equity 100% 60% 100% 100%
allowed
Minimum investment in service N/A 0.3 0.3 0.15
sector (USD in Millions)
Custom duty on import of plant, 5% 0% 5% 0-5%
machinery & equipment
Tax relief
(Initial depreciation allowance, % of
plant, machinery & equipment cost)

General
If set-up in an 50% 50%
underdeveloped area 90% 90%
Allowed as per guidelines
Royalty and financial fee No restriction on payment Initial lump-sum up to USD 100,000
[1]: Specific Industries are: Arms and Ammunition, High explosives, Radioactive substance, Security printing, currency and mint
 Foreign companies can choose between setting-up
a liaison office, branch office or incorporate a
Pakistani company as either its wholly owned
subsidiary or joint venture with a Pakistani /
overseas partner.
 The activities of a LO of a foreign entity are restricted to undertaking
promotional activities, provision of technical assistance, exploring the
possibility of joint collaboration and export promotion on behalf of its
parent company in Pakistan. Such an office is strictly restricted from
entering into revenue generating activities and is required to meet its
operational expenses through remittances from its parent company
through normal banking channel and converted to local currency
account.

A foreign company desirous of setting up a LO in Pakistan is required to

obtain permission from the BOI by submitting an application on a
specified format. The permission for opening of liaison office is granted
by the BOI for an initial period of three to five years. Further extension is
granted after reviewing the performance of the entity during the initial
period. The request for renewal / extension with complete
documentation is processed and disposed off within two weeks.
 A foreign entity can operate in Pakistan by establishing a BO. A BO is set
up specifically to execute the contracts awarded to the foreign entity;
therefore activity is restricted to the extent stated in the signed
agreement / contract. A BO cannot indulge in commercial / trading
activities.

Revenue generated / profit earned from BO activities can be repatriated

to the Head Office, subject to payment of applicable taxes. Such
repatriation should be in compliance with the procedure mentioned in
the Foreign Exchange Regulations of the SBP through an authorized
dealer (banker) under normal banking channels and Tax regulations.

All expenses incurred from BO activities will be met out of funds

transferred from abroad through normal banking channel and converted
to local currency account, or from the amounts received through
execution of the agreement / contract.
 A foreign company desirous of setting-up a BO in Pakistan is
required to apply for permission to the BOI on a specified
application format along with the prescribed documents /
information. The BOI normally takes six to eight weeks to
issue the permission letter after receiving the application,
however, in case of anticipated delay; 3 months provisional
permission can be granted on the request of the company.

Further extensions are granted by the BOI after reviewing

and examining the past performance of foreign companies.
Request for renewal / extension is generally processed by the
BOI within two weeks, provided the requests are supported
with complete documentation.
 A foreign company (LO / BO) is required to file prescribed
returns / documents with the Registrar of Companies in the
city where principal place of business is situated, within 30
days after obtaining permission from BOI, as per the
provisions of the Companies Ordinance, 1984.

Accounts of BO and LO
The requirements relating to preparation of accounts, audit and
submission of accounts to Registrar of Companies are also applicable
to the branch / liaison office of a foreign company.
Key differences between a public company and private company are highlighted
below:

S. No. Particulars Private Company Public Company

Single member Other private Un-listed Listed

1 Minimum 1 2 3 7
number of
members
(shareholders)
2 Maximum 1 50 Unlimited Unlimited
number of
members
(shareholders)
3 Minimum 1 2 3 7
number of
directors
4 Limitations for Restricted Restricted Allowed Allowed
share transfer
 Work Visas are granted to foreign technical and managerial personnel for the purpose of imparting
technical know-how and skills to the local population. To facilitate such foreign nationals to travel and
stay in Pakistan, business visa policies are considerably relaxed.

Missions abroad are authorized to grant five year validity (multiple) visa within 24 hours to businessman
of various countries on Business Visa List (BVL), with the duration of each stay restricted to three
months. The foreign nationals seeking a business visa need to produce one of the following documents:

Recommendation letter from Chamber of Commerce & Industry of the respective country of the
applicant

Invitation letter from business organization duly recommended by the concerned Trade Organization /
Association in Pakistan

Recommendation letter by Honorary Investment Counsellors of BOI

Recommendation letter from Pakistani Commercial Attach posted in Pakistan High Commissions /
Embassies / Consulates General abroad.

Business-persons and investors from any of the BVL listed countries will also be granted a thirty-day
landing permit on arrival at any airport in Pakistan.
 Work visas are granted subject to a constructive plan to train
Pakistani personnel to take over the technical and
managerial responsibilities over a reasonable period of time.

The multiple-entry work visa is issued for a period of one

year or up to the date of expiry of the applicants passport,
whichever is earlier. The concerned Pakistani Mission abroad
will grant work visas to the applicant, whereas extension in
work visa is endorsed by the Regional Passport Office of the
city where the expatriate is working, upon authorization by
the Ministry of Interior.
 Business visa conversion into work visa

For the purpose of changing the category of visa of foreign national

employees and investors from business visa to work visa, the concerned
expatriate is no more required to leave the country. The Ministry of Interior
will process such requests, upon receiving verification from the BOI.

Granting of Pakistan citizenship to foreign nationals (Investors)

Any person of a country recognized by Pakistan may obtain Pakistani

Citizenship by investing a minimum of USD 0.75 million in tangible assets and
USD 0.25 million (or equivalent in major foreign currency) in cash on a non-
repatriable basis, and by fulfilling the conditions of the Pakistan Citizenship
Law. Investment on a non-repatriable basis means that the amount is brought
to Pakistan through normal banking channels, converted into Pakistan
Rupees, and never remitted back.
Agriculture

It is the source of livelihood of almost 45% of the total employed labour force and
contributed 21% to GDP in 2009-10.

Total cropped area in 2009-10 was 23.80 million hectares.

Sindh grows a variety of field and horticultural crops with wheat, cotton, rice and sugarcane
contributing to 70% of the total cropped area

Horticulture contributes to more than 73% banana,34% mangoes,40% dates,40%

onion,88% red chillies and 30% mango of entire country production

Sindh produces 36% of rice, 27% of the sugarcane, 25% of cotton and 15% of the wheat in
the country
MANGO DATES
Mango production in Sindh is 371,000 Sindh produces 111,000 tons of dates,
tons, with growth potential of up to with potential for enhancement up to
450,000 tons annually 250,000 tons annually

International demand strong in The dates growing is concentrated in

markets of UAE, UK, USA, Singapore two adjoining districts of Sindh;
etc. Khairpur and Sukkur

Potential for greater export of Mango Due to improper processing and

if better facilities for cooling, grading, drying facilities, major portion of
vapour heat treatment and packing production is sold at lower prices
are developed
There is great potential for export of
processed dates and its bye-products
CHILLIES RICE
Sindh produces 10,000 tons red Coarse rice (IRRI-6) is the major crop
chillies with extra hot ratings of Sindh

Dry chillies are exported to Dubai, Sindh produced 2,537,000 tons of

Saudi Arabia, Canada, USA, UK and rice during 2008-0
other countries

Chilly powder is a value added

product

Chillies can also be processed as

whole and packed
 Livestock sector contributed 11.4% to GDP in 2009-10.

The value of livestock is 6.1% more than the combined value of major
and minor crops.

The poultry sector generates employment and income for about 1.5
million people.

Poultry meat contributes 19% to the total meat production in the

country.

Pakistan earned USD717 million from leather exports in CY09 and a

meager USD96 million from meat exports.
 During the year 2008-09, forests have contributed
83,000 cubic meters of timber and 205,000 cubic
meters of firewood, in comparison to 94,000 cubic
meters of timber and 267,000 cubic meters of
firewood in 2007-08.
 Fisheries, as a sub-sector, play a significant role in the national economy
and towards the food security of the country, as it relaxes the existing
pressure on mutton, beef and poultry demand.

During the period JulyMarch 200910 the total marine and inland fish
production was estimated 952,735 M. tons out which 667,762 Million tons
were marine production and the remaining catch come from inland
waters. Whereas the Production for the July-March 200809 was
estimated to be 914,141 M. tons in which 660,141 M. tons was for marine
and the remaining was produced by inland fishery sector. There is an
increase of 1.3 percent in the quantity compared to the last year.
GDP 1%
Contribution to Agriculture GDP 4%
Contribution to Labor Force 1%
Total value of fish production Rs. 50 Billion
Source of Livelihood
Direct Fisherman 400,000
Ancillary Industries 600,000
Per Capita Consumption 1.8 Kg
(Lowest in the World)
 Ventures in commercial scale Mari culture.
High value Fish e.g. SEA BASS, GROUPER, MULLETS, etc
Shrimp
Crab
Shellfish (mussels, clam, oyster etc)

Supply of fisheries inputs: services, fish fry, equipment and

feed

Fish Processing, Cold-Chain, Storage etc

Value addition and ready to cook products

 Agriculture
Growth 2% in 2009-10 whereas 4.7% 2008 - 2009
Major crops Kharif crops (Summer produce)
Rice (1.3% to GDP); Sugarcane (0.7% to GDP)
Cotton (1.6%
to GDP)
Rabi crops (Winter produce)
Wheat (contributes 2.8% to GDP)
Livestock and poultry
Growth 3.7% in 2008-09 in livestock
Annual growth of 11.2% in the poultry sector
Fishery
Growth 2.3% in 2008-09
 Growth in livestock has been in line with rapidly changing diet patterns across the
world. The share of livestock demonstrated growth by representing 52% of the
sector in FY2009 as compared to 30% in FY1991 whilst the share of crop sector
shrank to 45% from 65% over the same period.

The Federal Government has initiated mega projects worth PKR7.1 billion in
livestock.

Pakistan is the third largest producer of raw milk in the world with growth
potential of 20% per annum in exports. However only a negligible quantity goes
into processing due to lack of technical assistance, research institutes and weak
infrastructure.

The President inaugurated spring tree plantation drive in February 2010 with a
target of planting 58 million saplings. The GoP plans to launch tree plantation
campaign twice a year with a view to increase forest cover to 6% of the landmass
by 2015.
MANGO DATES
Mango pulp production industry Dates Syrup Plant

Production of better, high yielding Dates dryers

varieties
Dates processing plant
Picking and harvesting apparatus
industry Production of Chohara (Dry Date)

Contractual mango production for export Dates packing & storage

with fruit processing facilities
Dates tissue culture
Cool-chain, refrigerated containers

Hot water treatment, storage, ethylene

ripening, grading equipment

Control Atmosphere Stores

CHILLIES RICE

Green chillies processing & Parboiled Rice

packing
Paper Industry
Chillies drying
Rice Husk
Chillies storage

Chillies powder, packing

 Chinas dairy industry has been very successful at creating such functional products;
designer milk powder special fortified formulations for infants, young children,
teenagers, adults, and seniors- and these products are able to capture segments of the
markets that consume dairy products for their health benefits.

Somehow, much attention and focus is given to the large plants in Pakistan, while niche
players are also required to be encouraged. A technology-led and innovative products mix
approach can create a high margin niche in dairy plants.

Therefore, tremendous opportunities exist in introducing newer products with improved

flavours and by developing specific food solutions, for health, diet control and aging
population etc.

Introducing Organic products; this is a potential growth area but completely neglected by
the processors in Pakistan. Smaller processors manufacturing traditional sweets or organic
product lines can also create success stories both in domestic and possible export markets.

Improved packaging solutions will be the key of Pakistan.

 Pakistan is 21% GDP comes from agriculture sector and agriculture
sectors largest share is contributed by milk production. According to
Economic Survey of Pakistan 2007-08 Pakistan produced about 42.19
billion litters of milk. It is ranked 5th largest milk producer in the world.
The annual milk production is shared between a 71.1% share for the rural
economy and a much smaller urban share for the rural economy and a
much smaller urban share of 29%. Only 3% of the total production of
milk is processed and marketed through formal channels. For the other
97%, a multi-layered distribution system of middlemen has evolved to
supply milk. However, 40% Supply and Demand gap exists in Pakistan.
This weakness can be exploited through commercial dairy farming in the
vicinity of large cities and towns.
 Production of milk falls to 55% of peak production as its lowest point in mid-June, while the demand
increases 60% during this time compared to December when the milk supply is ample.

There are 8 million farming households in Pakistan with a total herd size of 50 million animals. 97% of
these farmers are not linked to formal markets and hence are not progressing in economic terms.
Moreover, the overall animal herd of Pakistan is thinly spread across thousands of square kilometres
with an average of 2 to 5 animals per household.

The Government of Pakistan has launched White Revolution scheme which aimed at modernizing the
industry with a view to increase milk supply, mitigate poverty and improve the living standard of the
rural population. This would further create an additional 3 million jobs in the formal economy and
provide an estimated 350 million rupees per day in cash flow to farmers in the sector or to say that an
additional formal economy of US$ 3 Billion will be developed for the rural economy.

The investment potential estimated on the basis of the fact that livestock and agriculture sector
contributes over 10% to the GDP, and a milk economy that in value terms is 27.7% of the total agriculture
sector. It is an untapped market, expected to grow an additional 3 billion litres in the next few years at a
growth rate faster than most sectors, and 30% by 2015.
 100% foreign equity allowed (only in CAF on case to case basis)
Minimum $ 0.3 foreign equity investment
Remittance of 100% capital, profits, dividends allowed
Only such local and foreign companies will be entitled to Corporate Agriculture
Farming that are incorporated in Pakistan under the Companies Ordinance, 1984.
No upper ceiling on land holding. The size of the proposed corporate farm may
be left to be determined by the prospective investor.
State land can be purchased, or leased for 50 years through open auction,
extendable for another 49 years
All banks and financial institutions will earmark separate credit share for
Corporate Agriculture Farming (CAF)
Labor laws may not be presently applicable to Corporate Agriculture Companies.
Due to special circumstances of the agriculture sector however appropriate labor
laws be developed for this sector within five year.
Agriculture Income Tax regime applicable in provinces, on income from
agriculture, would be applicable to Corporate Agriculture Farming
 0% custom duty and sales tax on import of
agricultural machinery, equipment and implements
under SRO 575(I)/2006 dated 5th June, 2006
Exemption of duty on transfer of land for CAF
Tax relief; Initial depreciation allowance @ 50% of
machinery cost.
Dividends from corporate agriculture farms are not
subject to tax
Farm income given more favourable treatment than
income from other sources
 Land development / reclamation of barren land, desert and
hilly areas for agriculture purpose and crop farming.
Reclamation of water Front Areas/ Creeks.
Crops, Fruits, Vegetables, Flowers Farming / Integrated
Agriculture (Cultivation and processing of crops).
Processing of agriculture products.
Modernization and development of irrigation facilities and
water management.
Plantation/ Forestry.
Dairy, small ruminants (sheep, goat) and other livestock
farming.
 Government of Pakistan encourages all types of business activities from micro to
macro level in the Agriculture sector, Generally no NOC/ License is required from
the Federal Government Ministry i.e. Ministry of Food Agriculture &Livestock,
The choice of business either sole Proprietorship or Partnership (Public or private)
Depends upon the entrepreneurs. In case of Corporate Agriculture Farming (CAF)
A Company should be registered with the Securities & Exchange Commission of
Pakistan(SECP) under the Companies Ordinance 1984

However with regards to land acquisition on purchase or lease basis an

entrepreneur is required to get the approval from the Agricultural /Livestock
Departments of Provincial Government (Punjab, Sindh, N.W.F.P. and Baluchistan)
which are sole owners of lands available for Agricultural activities in each
province, In order to avail tax exemptions. An approval from Board of Revenue,
Departments of all the Provincial Government is also required in coordination
with the Federal Board of Revenue (FBR)
 Total auto sales in 1HFY2010 increased by 16.37% to 61,021 units from 52,435 units in the
same period of last year.

The auto industry was operating at 37% of its installed capacity of 273 thousand units per
annum in FY2009 and it is expected that 20% YoY growth in sales in FY2010 can easily be
met through higher production by assemblers utilizing the existing capacity.

Pakistan has the second highest number of CNG-powered vehicles in the world with more
than 1.55 million cars and passenger buses, constituting 24% of total vehicles in the
country.

Investment in the automotive sector stood at USD70.2 million in July 08 April 09.

Despite recessionary phase Indus Motor Company and Honda Atlas Cars launched new
models for their key products, Corolla and City in the local market.

Car sales are related to the interest rate regime functional in Pakistan especially in the
small-low and economy segments, whilst purchases in the small-high segment (1300cc and
above) are dependent on rising income level and improved living standards.
Market size Installed capacity of 273,000 units in FY2009
Market players Honda Atlas, Pak Suzuki, Indus Motors,
Mitsubishi, Dewan Farooque, Sigma Motors,
Hinopak

Domestically manufactured parts account for

less than 60% of all components as compared
to a targeted 80-85% and producers rely
heavily on imports of key components.
Sales Auto (cars and light-commercial vehicles -
LCV) sales experience a cyclical decline
towards the end of each calendar year as
consumers delay purchase decisions for
registrations in the new year.
 Pakistan has one of the lowest motorization levels (8 vehicles per 1000 persons)
in Asia compared to India (11), Sri Lanka (25), and Malaysia (641) indicating a
domestic market rife with growth potential.

Declining interest rates regime adopted by SBP likely to induce increased market
for purchases in the small-low income segments.

The removal of 5% excise duty (passed on to the customers) will enhance sales
growth. Fall in steel prices has massively reduced the cost of production of
vehicles. Engineering Development Board (EDB) is actively implementing the
Auto Industry Development Program (AIDP) to achieve the following targets:
Increase the GDP contribution of the automotive sector to 5.6%,
Boost car production capacity to half a million units
Attract an investment of USD3 billion
Reach an auto export target of USD650 million.

The City District Government Karachi has introduced new CNG buses as public
transport vehicles
 Tax relief: First year allowance or Initial Depreciation
Allowance @50% of Plant, Machinery & Equipment.

Remittance of capital. Profits dividends, etc is allowed.

100% of foreign equity is allowed.

5% custom duty on import of PME not manufactured locally

 Sitara Chemicals
Ittehad Chemicals
ICI
Olympia
Engro Asahi Plymers
Gatron
Dewan Salman
Wah Nobel
Descon chemicals
Rathan Maize
LG Petrochemicals
Pak-China Chemicals
P&G
Colgate Unilever
Clariant
 Polyester
Fertilizer
PTA
Polysrene
Phtalic Anhydride
Dop
Caustic Soda
Hydrochloric Acid
Chlorine
Soda Ash
Sulphuric Acid
Ethanol
Dyes & Pigments
Paints &Varnishes
Pharmaceutical
 Ordinance Portland Cement (OPC)

Sulphate Resisting Cement (SRC)

Blast Furnace Slag Cement (BFSC)

White Cement
 Investors are not required to obtain No
Objection Certificate (NOC) from the
provincial Governments for locating the
project anywhere in the country except in the
country except in the areas that are notified
as negative areas.
 The existing power deficit has been a key blockage for industrial and commercial
activities since demand for electricity grew by 6% during FY2003- 09 without a
corresponding addition to the supply grid during FY1998-08.
The current supply shortage has been estimated at 3,500MW (megawatts) with
frequent electricity outages experienced country-wide.
67% of Pakistans electricity generation is tilted towards thermal power
generation with power plants operating at a reduced capacity utilization of 34%
presenting opportunities for investment in plant machinery.
Two nuclear power plants; Karachi Nuclear Power Plant (K-1) and Chashma
Nuclear Power Plant unit 1 (C-1) are operational, while construction of a third
plant, Chashma Nuclear Power Plant unit 2 (C-2) is also in progress.
In order to meet the current and future energy demand, the GoP is working on
different power generation projects which are expected to contribute additional
power supply of 9,817MW by the end of 2011-12 to the installed capacity of
19,754MW in 2008-09.
Pakistan Atomic Energy Commission has also been given the task of increasing
nuclear power generation capacity to 8,800 MW by the year 2030.
 With the expansion of electricity network, the number of consumers also
increased from 10.8 million in 1998-99 to 18.5 million consumers in March 2009.
Pakistan enjoys abundance in coal resources estimated at over 185 billion tones,
including 175 billion tones identified at Thar, in the Sind province. Only 18% of
total gas reserves have been discovered in the last decade.
Zorlu Energy Pakistan Limited has commissioned its first phase (6MW) of a wind
power plant in April 2009. Zorlu has indicated that it would like to install an
additional 2GW of renewable energy capacity in Pakistan by 2015.
Pakistan's Executive Committee of the National Economic Council has approved
infrastructure projects worth USD11.78 billion, including the flagship Diamer-
Bhasha hydropower dam. Pakistan and China have also signed a MoU to build
the Bunji dam in Astore district in the north with power generation capacity of
7,000MW.
Sindh Board of Investment signed a memorandum of understanding with AZUR
Power of Germany for setting up a 50MW solar power plant in the province, Iran-
Pak Power Generation for a 50MW wind power plant and with Trans Atlantic, a
Dutch government-sponsored company, for a 36MW wind energy plant.
 The consumption of petroleum products and coal, during
July- March 2007-08 of the current fiscal year witnessed
significant increase, this is most likely due to higher demand
of oil in agriculture and power sectors.

The household sector has been the largest consumer of

electricity, accounting for 45.6% of total electricity,
consumption followed by industrial (28.4%) agriculture
sector(11.8) other government sector (6.2% ) Commercial
sector (7.4%) and street lights (0.6%
Installed Power Generation Capacity 19,754 in 2008 2009

Major Players with installed capacity

Thermal Central Power Generation Company Limited

at Guddu

Hydel plants Tarbela plant (3.05GW), Mangla (1GW),

Warsak (240MW) and Chashma (184MW)

IPPs thermal Kot Addu (1GW); Hubco (1.3MW)

Nuclear Chashma-1 (300MW) and Kanupp (125MW)

Electricity supply WAPDA & KESC

 The rising energy deficit, high vulnerability to oil prices, and expensive energy import
options, all have resulted in significant government attention and incentives for the
sector.
The GoP is offering increased incentives to the private sector for the task of
developing independent power producers (IPPs) and rental power projects (RPP). The
GoP guarantees 15% USD IRR along with passage of all expenses to the consumer and
17% for hydel generation. Thus providing predictable multi-year and long term tariff.
Under the remote village electrification program, the Alternative Energy
Development Board (AEDB) plans to electrify 7,874 remote off-grid villages in Sind
and Baluchistan.
In order to meet enhanced gas requirements, The GoP has been providing improving
economic terms for investment in oil and gas exploration through its petroleum
policies.
Further, in order to tap the mass reservoir of coal reserves at Thar, GoP is considering
offering USD indexed IRR of 20-21%.
AEDB is actively working to install 103 micro hydro power plants in Chitral as well as
other locations in the Northern areas.
The Asian Development Bank (ADB) has approved a USD810 million multi-tranche
financing facility for the power sector.
 Electricity Generation 2008-09
Total 95,860 GWh

Oil Hydel
32.16% 29.96%

Coal
0.10% Nuclear & Imported
Gas 3.41%
34.37%

Source: Pakistan Energy Outlook 2008 2009

 Sindh
185,457 million tonnes

Punjab
235 million tonnes

Balochistan
217 million tonnes

NWFP
90 million tonnes
Thar
Azad Kashmir
9 million tonnes

71
Source: Mines & Minerals Development Department, Government of Sindh
 Pakistan is a coal rich country
The total coal resource of Pakistan is more than 185 billion tonnes
Coal deposits are located in all the Provinces of Pakistan and in AJK
The coal reserves of Pakistan are considered suitable for power generation and comparable
to other successfully exploited coals in the world
Pakistan has a population of about 162 million, and only 60% people have access to
electricity, resulting in a large and growing domestic power market
To facilitate the entrepreneurs interested in developing coal based projects in province of
Sindh, the Govt. of Sindh has completed the basic infra-structure of roads and water supply
system
Government guarantees the performance of the power purchaser
Government provides protection against political risks and change in law
Concessionary duties and taxes regime announced by the GOP for the power sector
One-Window facility provided at Federal level through PPIB, for power projects above 50
MW
Efficient and cost-effective technical manpower available in coal mining and in the power
sector
Pakistan has successfully attracted four billion dollars from private sector in power
 Main emphasis has been given on the development of power projects based on
indigenous fuel resources including coal.
Unsolicited coal proposals on raw-sites can only be considered if respective
provincial governments have already signed an MOU with the prospective
investors.
On identification of a raw site by the provincial authorities, PPIB would advertise
coal raw sites for seeking proposals from investors.
PPIB may also carry out International Competitive Bidding (ICB).
The GOP will guarantee the terms and conditions of executed agreements, i.e.
IA, PPA, including payment terms, are maintained for the duration of the
Agreements for projects.
The coal power generating companies will be allowed to import plant, equipment
and machinery not manufactured locally, at concessionary rates. The power
companies will also be completely exempted from the payment of income tax
and withholding tax on imports.
 Customs duty at the rate of 5% on the Import of plant and equipment not
manufactured locally.
No levy of sales tax on plant, machinery and equipment.
Exemption from Income Tax including Turnover Rate Tax and Withholding
Tax on import.
Repatriation of equity along with dividends is allowed.
Permission to set-up integrated coal-mining and power projects
Maximum indigenization as per GOP policies is allowed
Secured return on investment for dedicated coal resource developed for
Power generation
Investment made in integrated projects of coal- mining and coal power
plant to be recovered from Tariff
Non muslins and non residential shall be exempted from payment of
Zakat on dividend paid by the company
 Permission for power generation companies to issue corporate
registered bonds
Permission to issue shares as discounted price to enable venture
capitalist to provide higher rates of return proportionate to the
risk
Permission to foreign bank to underwrite the issue of shares and bond
by private power companies to the extent allowed under the laws of
Pakistan
Non residential are allowed to purchase share of Pakistani company with
out permission from SBP subject to prescribed rules and regulation
Independent rating agencies available in Pakistan to facilitate investors
in informed decision about the risk and profitability of the project/TFC
 TCEB shall act as a one-stop organization on behalf of all the Ministries, Departments and
agencies of the Government of Pakistan (GOP) and those of the Government of Sindh
(GOS) in the matters relating to development and leasing/subleasing at Thar (on behalf of
the GOS), Mining, development of Clean Coal technologies, R&D activities, and other allied
matters including but not limited to Gasification, Briquetting on Thar Coal;
To attract investment for coal mining and/or coal gasification at Thar and other areas of
Sindh province, to be used for power generation or other purposes, by creating a conducive
environment through conducting bankable feasibility and other relevant studies, resolving
issue of cooling and drinking water, improving infrastructure and law & order, and carrying
out aggressive marketing;
To negotiate, finalize and execute agreements;
To assist investors in obtaining necessary consents;
To liaise and collaborate with the Private Power and Infrastructure Board (PPIB) for further
processing of Private sector Integrated Coal Mining/Coal Gasification power generation
projects after approval by the Thar Coal & Energy Board, i.e., issuance of Letter of Interest
(LOI), negotiation/execution of agreements relating to power generation, etc;
To assist GOP and the GOS in formulating. Policy guidelines for coal development and
mining, respectively, and to implement their. approved policy guidelines;
To take all necessary measures including but not limited to formulation of rules and
regulations for early and effective implementation of the above.
 Sponsors to approach PPIB with their proposal
PPIB Board to examine the proposal of sponsors
If approved by PPIB Board, Registration with PPIB after payment of USD 100/- (US Dollars
one hundred only) in favour of PPIB
Purchase of Pre-Qualification Document (PQD) from PPIB
Submission of Statement of Qualification (SOQ) to PPIB
Subject to SOQ approval by PPIB Board, request by PPIB to the project company to furnish
Performance Guarantee (PG) at USD 1,000/MW (US Dollars one thousand per MW)
Subject to issuance of Letter of Interest (LOI) by PPIB, the project company shall conduct a
bankable Feasibility Study to ascertain economic, financial and technical viability of the
power project. The Feasibility Study is usually monitored by a Panel of Experts (POE)
appointed by PPIB
Subsequent to approval of Feasibility Study by the POE/PPIB, the sponsors are advised by
PPIB to approach National Electric Power Regulatory Authority (NEPRA) for their tariff
determination
Upon successful determination of tariff by NEPRA, and submission of Performance
Guarantee (PG) at USD 5,000/MW (US Dollars five thousand per MW) and a non-refundable
processing fee of USD 100,000 by the project company in favour of PPIB
A Letter of Support (LOS) to the project company for starting construction activities,
financial closure, signing of project agreements, and subsequently thereafter the
commencement of Commercial Operations
 Extremely attractive / investor-friendly RE Policy 2006
Resource Variability Risk Coverage
Buy Back Guarantee
Political Risk Coverage
Fiscal / Financial Incentives
Attractive IRR
Facilitation for procurement / lease of land for wind farms
provided by AEDB (unheard of in other territories around the
world)
Extremely cheap rates offered for Land for wind farms (Euro
7/- only per acre per year)
Attractive Tariff Offered
Mitigate Effects of Climate Change
 Pakistan has a 1,046 Km coastline in the
South
Average wind speed more than 7 m/s in Gharo
Wind Corridor
Estimated wind potential more than 50,000
MW
Other sites in Baluchistan, Punjab and
Northern Areas being identified
 Attractive cost of land for wind energy projects (7 per acre
per year)
Wind data measured, analyzed and Wind Risk for the first
few projects taken by Government
Wind data validated by Rise National Laboratory of Denmark
30% ~ 32% Capacity factor estimated in Gharo - Keti-Bandar
area
Policy Guidelines for Tariff Determination approved by the
Federal Cabinet
15% Return on Equity (ROE) guaranteed as per NEPRA
guidelines
 Unsolicited proposal
Investor to initiate and then follow the
rules and regulation
Solicited proposal
AEDB/Provincial/Ajk AGENCIES invite the
BIDS
Security package and risk cover
GOP guarantee on payment
Protect against all political risk
Provide protection against changes in the
tax and duty regime
Ensure convertibility of Pakistan rupee in
US dollar at prevailing rate and remit
ability of foreign exchange to cover
necessary payments
Indexation of tariff to cover dollar
fluctuation, inflation e.t.c
Fee & Structure
Corporate Fee and contractual
arrangements are mentioned
Each IPP setting up plant meant only
for supplying power to utility grid will
be required to form a company
according companies ordinance 1984
have to obtain a license from
NEPRA. While company which is not
exclusively for sale to power utility
may not bound to form company.
Type of Contract
BOO & BOOT which is valid for
period not less than 20 years where
RE IPP is selling to grid otherwise no
such contract is necessary.
 Duty free import of raw materials for NPK production i.e. Ammonia Phosphate,
Mono Ammonium Phosphate, and Triple Super Phosphate etc.

Second hand machinery/ plant is importable same duty as new plant i.e.10%

Tax Relief as IDA@50%of the cost of the PME

For existing Plants, annually gas prices would increase effective from July 2001-
July 2006 @Nil.5%, 7.5% 12.5%and 15% respectively. Thereafter the prices to be
$1.10MMBTU or prevailing Middle East price whichever is higher

Prices for fertilizers shall remain deregulated; to ensure this objective a

committee under ministerial committee would meet when required

The gas used in reforming furnace for heating will be treated as feedstock
 Assured supply of gas used as fuel at least for 9 months in a year

All the fertilizer producers domestic and foreign will be treated equally as
well as public and private

It would be the responsibility of the DFIs to check the economic viability

to the projects before providing finance

Expansion would be treated as new plant and would be entitled to the

same concessions as allowed to new plants

Withholding Taxes at the same time of import of fertilizer shall be

adjusted against assessed income tax of the year in case fertilizer is
imported by a manufacturer of fertilizer
 Ministry of Industries gives NOC.

After approval they ask for information related to the type of Fertilizer Plant and
the basic requirements e.g. in case of Nitrogenous Fertilizer the availability of
Gas etc.

The case is then referred to National fertilizer Development Centre (NFDC) for
technical analysis.

NFDC analyses the company profile in terms the capacity. Products no. of
employees to be hired etc.

NFDC also comments on the policy matters in the light of fertilizer Policy 2001

Ministry of Food & Agriculture (MINFAL) is also responsible to give comments

/views for the prospective fertilizer plant.
 Custom duty @5% under SRO:457(I) 2004 leviable on import of plant, machinery
& equipment (not manufactured locally) for fertilizer projects

Duty free import of raw materials for NPK production i.e. Ammonia Phosphate,
Mono Ammonium Phosphate, and Triple Super Phosphate etc.

Second hand machinery/ plant is importable same duty as new plant i.e.10%

Tax Relief as IDA@50%of the cost of the PME

For existing Plants, annually gas prices would increase effective from July 2001-
July 2006 @Nil.5%, 7.5% 12.5%and 15% respectively. Thereafter the prices to be
$1.10MMBTU or prevailing Middle East price whichever is higher

Prices for fertilizers shall remain deregulated; to ensure this objective a

committee under ministerial committee would meet when required
 The gas used in reforming furnace for heating will be treated as feedstock

Assured supply of gas used as fuel at least for 9 months in a year

All the fertilizer producers domestic and foreign will be treated equally as well as
public and private

It would be the responsibility of the DFIs to check the economic viability to the
projects before providing finance

Expansion would be treated as new plant and would be entitled to the same
concessions as allowed to new plants

Withholding Taxes at the same time of import of fertilizer shall be adjusted

against assessed income tax of the year in case fertilizer is imported by a
manufacturer of fertilizer
 State Bank of Pakistan (SBP) allows complete freedom of investment and
repatriation of profits/ Dividends/disinvestment proceeds to the foreign investors
in line with the overall investment policy. Once the investment received is
registered with SBP, foreign investors can repatriate disinvestment proceeds.
Profits/dividends capital gain etc. with out the approval of SBP.

Further, under the existing foreign exchange regulations any foreign investor can
invest in shares /securities listed on Stock Exchange in Pakistan and can
repatriate profits/ Dividends of disinvestments proceeds without SBPs approval.
The only requirement for such portfolio investment is that the foreign investor
has to open a Special Convertible Rupee Account (SCRA) with any bank in
Pakistan.

Resident entities are also allowed to borrow in FCY from institutions abroad
under various categories of loans subject to fulfilment criteria.
 The NBFI S sector comprises DFIs,
modarabas, mutual funds and Non Banking
Finance Companies (NBFC)that showed
stellar performance as is evident from CAGR
of 11.9% in assets (2005).this sector is
regulated by the Securities and Exchange
Commission of Pakistan.
 The total teledensity in Pakistan is over 59%, which was just
2.8% at the end of 2000. Pakistan shows highest teledensity
growth in the region followed by Srilanka 37% and India 17%.

Foreign Direct Investment (FDI) in telecom sector US$ 1.4

billion (2007-08).

Cellular phone subscriber base crossed 88 million by June

2007.

Cellular mobile density is 54.70% (June 2007).

 Fixed Line Telephony

Long distance & International License

Local Loop License

Infrastructure License

Cellular Mobile License

Class VAS License

(All licenses are to be obtained from Pakistan Telecommunication

Authority- PTA)
 Call Centres for help desks, complaint
services and sales

GIS (Geographical information System)

mapping

Business Process Outsourcing (BPO)

 Database Application (MIS, Workflow, ERP etc)

Database Warehousing & Data Mining Facilities

Intranet & Extranet Solution Development

Network Deployment & Configuration

System & Process Application Development

 Voice over internet Protocol (VoIP)

Calling Cards

Wireless Local Loops (WLL)

 Conditions
Policy Parameters Manufacturing Sector Non- Manufacturing Sector (It &
Telecom Services)
Govt: Permission Not required except specific licenses / Not required except specific licenses /
registrations/ type-approved from registrations/ type-approved from
concerned agencies e.g. SECP, FBR, concerned agencies e.g. SECP, FBR,
EOB, PTA, and Ministry of Information EOB, PTA, and Ministry of Information
technology technology

Remittance of capital profits, dividends, Allowed Allowed

etc
Upper limit of Foreign equity allowed 100% 100%

Minimum Investment Amount No Restriction 0.15 Million US$

Customs duty on import of PME (Not 5% 5%

manufactured locally)

Sales Tax on import of PME (Not 0% 0%

manufactured locally)
Withholding Tax on Import of PME 0% 0%

Initial Depreciation Allowance, % of 50% 50%

PME cost
Royalty & Technical fee (Not Not restriction for payment of Allowed as per guidelines:
Related) royalty & technical fee. Initial lump-sum up to
$100,000
Max Rate 5% of net sales
Initial period 5 years
In case of non-residents is such
as contained in the overriding
Provision Of bilateral
agreements on avoidance of
double Taxation.

Withholding Tax on Dividends:

Public & Insurance Cos. 5% 5%
Other Companies 10% 10%

Withholding Tax on Capital Goods 1% 1%

Corporate Tax rates: TaxYear 2006 TaxYear 2007

Public Companies 35% 35%
Private Companies 37% 35%
 The pharmaceutical manufacture and trade in Pakistan is regulated through the Drug Act 1976 , And the
rules framed there under. Pakistan was the first amongst the developing countries in the world to have
introduced Good Manufacturing Practices as a mandatory requirements , Registrations are granted by
the Central Licensing and Registration Boards. Drug Control Organization, Ministry of Health,
Government of Pakistan is the primary authority for obtaining Pharmaceutical Manufacturing License
for Drug Formulation Activity. The procedure of gittig licenses/NOC along with fee detail is as under:

Application with Documents of Ownership of Company /Firm

Verification of Site

Approval of the Layout Plan

Application for Grant of a Drug Manufacturing License

Inspection of Facilities

Orders of the Central Licensing Board

Issuance of License

Suspension /Cancellation/Denial for Renewal of License

 Registration of Drugs: Registration of a drug is granted by the Registration Board , set up
by the Federal Government under the Drug Act. 1976 .This Board, comprises of 21 experts
in the field, before registering a drug, satisfies itself of its safety, efficacy, quality and
economy. The Board also take into consideration the public interest, addition in respect of
registration of a drug for local manufacturer, it is ascertained that the manufacturer
possesses matching facilities . The Process is as follows:

Application for Registration

Evaluation of the Application

Orders of the Board\

Drugs Registration

Communication of the Orders of Drugs Registration Board

Renewal of Registration of Drugs

 Refinery Pricing Formula rationalised and linked with actual import cost,
to provide incentives for up -gradation/expansion of existing refineries.

The prices and allocation of LPG deregulated ,With these incentives the
production of LPG has risen to 1600 tons/per day,

Consumer prices of Furnace Oil and White Oil products linked to the
international prices and adjusted on fortnightly basis.

Consumer prices of gas are reviewed bi-annually on the basis of coast of

supply. This will improve the confidence of foreign oil and gas producers
and protect the gas utilities.
 Prequalification of applicants/ companies

Licenses awarded through transparent and open competitive Bid

Evolution Process

135 days process after close of call of nomination which includes:

Invitation of Bids within 25 days

Incitation to Bid will remain valid for at least 90 days

Bid Evolution on the basis of total work units (80% weighted) and gas
price gradient when reference price is above US$ 45 /bbl (20% weighted)

License /PCA/ PSA will be concluded within 30days

 Natural gas price is linked with C &F prices of imported crude oil

Guaranteed Foreign Exchange permitted

Imported of equipment allowed on concessionary rates

Royalty payable @ 12.5% of the value of Petroleum at field gate

Corporate income tax is 40% of profits and gains

Local companies encouraged to establish Joint Venture with foreign

companies

Royalty will be treated an expenses for the purpose of determination of

income tax liability
 No permission is required for setting up new refinery

Pricing formula for new refineries linked with Singapore Mean FOB spot
price

Import of crude oil from any source after lifting local crude, if allocated

Concessionary rate of taxes for import of equipment not manufactured

locally

Refineries are free to sell their products to any marketing company or

market the product through their own marketing network

Deregulated Lube industry

 BHP Billiton
British petroleum
Pakistan Oilfields
Pakistan Petroleum
Hycarbex-American Energy Inc.
MAKCO
Mari Gas Company
MOL Pakistan
Oil and Gas Development Company
OMV
Orient Petroconpak
PETRONAS
Polish Oil and Gas Company, United States
Zaver Petroleum Corporation Limited
 Government of Pakistan encourages all types of business activities from
micro to macro level in the Mineral sector. For this purpose the Federal
i.e. Ministry of Petroleum & Natural Resources, Mineral Wing & Provincial
Governments of all the four Province3s will provide following four types
of Licenses to the eligible entrepreneurs:

Reconnaissance License (RL)

Exploration License(EL)

Mineral Deposit Retention License 9MDRL)

Mining Lease (ML)

 Apart from the above mentioned Licenses the entrepreneurs
will be required to follow the international environmental
obligations which would ensure sustainable development
with consistent environmental priorities. In this regard
mining companies will have to submit to the Government an
Environmental Impact Assessment (EIA) and Environmental
Management plans. Moreover, An applicant for grant or
renewal of EL, MDRL or ML will be required to provide at the
time of the grant or renewal a guarantee, in a form
satisfactory to the Licensing Authority (either Provincial or
Federal) , to ensure performance of the licensees or lessees
obligations.
 The Foreign Private Investment (Promotion and Protection) Act,
1976. Guarantees that a foreign investor in an industrial
undertaking may at any time repatriate capital and profits. This
includes mining ventures.

Investment in small scale mining (capital employed less than

Rs.300 million) will be continued to Pakistani nationals.

Corporate merger of small scale mine operators will be

encouraged.

The Federal and Provincial Governments will provide grants to the

respective corporations for the promotional tasks on priority
areas.
 Mining and establishment of rock salt based chemical industries.

Mining/cutting and polishing of hard/soft dimension stone(Granite,

marble, Limestone )

Commissioning of coal washing plants for up gradation of indigenous

coal for processing industry

Commissioning of Fullers Earth plant from Bentonite deposit.

Utilization of low grade iron ores for commissioning Steel Mill

Coal based Power generation projects.

Lapidary industry.
 Foreign companies will be free to apply for and be granted licenses without the
need to incorporation locally. However, no mining lease will be given until the
foreign company is incorporated locally.

The provincial Government may enter into an agreement with an investor, within
the framework of the law, to stablize the terms or to predetermine procedure
with respect to certain matters relating to the carrying out of operations under
license/lease

Mining operation will be allowed to insure their assets and risks with international
insurance companies

The mining concession rules will provide for four types of minerals titles, namely:
Reconnaissance License, Exploration license, Mineral Deposit Retention License
and Mining lease

Mining and value added minerals processing are placed in category A industries.
 Sindh has billions tons of M&G reserves

Quality and Colour is best in the word.

India is a top exporter from the same region

USA & China are the largest markets for it

Karachi is the biggest cluster of M&G

Processing
 In 2008 the health care and pharmaceutical sector contributed 2.2% to the countrys GDP,
with the pharmaceutical sector solely contributing 1% to GDP (PKR101.6 billion).

Demand for pharmaceutical products has been growing at about 10%-15% a year over the
past few years.

There are 455 licensed pharmaceutical manufacturers in Pakistan and 29 multinational

companies (MNCs). The remaining demand is met by 212 drug importers.

The sale of pharmaceutical products in international markets has almost doubled during
the last five years. The industry is focusing on an Export Vision of USD500 million by 2013.
In the meantime, exports are also likely to get a boost due to new regional and global
opportunities.

Unlike global trends drug demand does not follow a seasonal pattern and sales remain
similar through out the year because of poor health and environment conditions.
Market size USD1.35 billion as at 31 March 2009
CAGR 12% over the last five years until April 2009
Capital investment USD0.5 billion (as of March 2009)
Major Market Glaxo SmithKline Pakistan, Johnson & Johnson, Aventis
players Ltd., Reckitt & Benckiser, Roche, Abbott Laboratories,
Merck Marker, Novartis, Pfizer Laboratories

Market share Top 50 producers contribute to 84.5% of the market

share
Top 50 domestic producers contribute to 45.5% of the
market share
Domestically Pain killers, anti-stress and anti-depressants, anti-
produced drugs infective,
penicillin etc.
Imported Products Antibiotics, vaccines, analgesics, tranquillizers, drugs for
treating cardiovascular diseases & cancer

Import markets US, UK, Germany, Switzerland, Japan, Netherlands and

France
 Rising life expectancy thus consequent rise in number of elderly people and
increasing urbanization will stimulate demand for pharmaceutical products and
health care services.

Customs duty on import of packing materials has been reduced from 25% / 20% /
10% to just 5%, on import of polyacrylate, piston caps, laminated heat sealable
paper, kraft paper (wax coated) non-woven fabric and non-woven paper.

Spending on health care and pharmaceutical products are expected to rise from
PKR261 billion in 2008 to PKR424 billion in 2013.

The export size of pharmaceutical industry is currently at USD101 million and has
the potential to grow many folds to at least USD1,000 million.
 Cotton based textile contribute:

54% of the total exports

Accounts for 46% of the total manufacturing

Provide employment to 39% manufacturing labour force.

Pakistan is the worlds fourth largest producer of cotton and the third largest
consumer of the same.

The availability of cheap labour and basic raw cotton as raw material for textile
industry has played the principal role in the growth of the textile industry in
Pakistan.

With the advent of the quota free global imperative for a rapidly developing
country like Pakistan to further explore potential new markets both in its
neighbouring territories as well as distant ones.
 100% foreign equity is allowed

Gradual reduction of import duty on textile machinery and parts to 5% ad

valorem except spinning rings on which it is 10%

Sales tax on import of and local supply of major inputs/raw material

utilized in the same manufacturing regime of textile industry have been
rated Zero.

Imports duty on raw, sub-components and components used in local

manufacturing of textile plants and machinery of exports sector has been
reduced to 0% (SRO 565 (1)/2005)
 Import duty on ginning presses has been reduced to 5%

Turnover tax has been reduced to 1% on retailers of specified textile fabrics and
articles of apparel including ready made garments or fashion wear. The 15% sales
tax levied earlier on retailers has been reduced mark-up of 7% and 6% for 7 and 3
years period respectively.

The refinancing rate has been reduced to 7.5% from 9%

R&D support @6% shall continue to be given to ready made garments and
knitwear exports

In addition R&D support will also be available for exporters of the following:

Dyed/ Printed Fabrics and white home textile @ 3%

Dyed Printed Home textiles @ 5%

 According to Pakistan Social and Living Measurement Survey 2007-08, the overall literacy
rate (age ten years and above) is 56%, with 71% in urban areas and 49% in the rural.
The trend of investment on education in terms of GDP has been on the lower side with
2.50% & 2.47% in the years 2006-07 and 2007-08 respectively, and was estimated to be
2.10% during 2008-09. The primary cause is considered to be the financial constraints in the
given economic situation.
Investment case for education with only 124 universities catering to approximately 170
million people in the country and approximately 20 million school age children lacking
access to . course material and books for different tiers of education is in some case
outdated and there are limited resources for teachers training resources and research
laboratories.
The GoP approved the new national education policy in September 2009 which suggests
raising the annual budgetary allocation for the sector to 7%of the GDP and increasing
literacy to 85% by 2015.
Foreign assistance of USD1,974 million has materialised in the past few years targeted at
improving education in the country.
Pakistan has a young workforce of 51.78 million (2007-08) with a literacy rate of 56.2%,
leaving greater room for public as well as private partnerships to augment access to
education, build infrastructure as well as train staff to achieve a skill development system
that can be benchmarked against international standards.
 Approximately 9,000 acres of land has been legally notified as Education City

Core elements of EC are local educational and health institutions that will provide locally
relevant solutions to Pakistans challenge of higher education

Opportunity and attraction to remain and study in Pakistan.

1,839 acres of land has been allocated to 7 local institutions while more than two dozen
other institutions are awaiting allotments

Educational institutions will create the opportunity for private R&D businesses as a
component of EC

Residential and commercial development will enjoy a quality of life or character of

community that is typical of educational communities

A consortium of planners Arcop Group, Chan Krieger Sieniewicz (USA), and Halcrow
(Pakistan) is in the process of developing a master plan for the Education City
 The tourism sector of Pakistan, although currently not an extreme
priority for the GoP under its development program, has great
potential to attract investment.
It has been given the status of an industry in Pakistan and holds
great promise for prospective investors.
Pakistan has a blend of beauty and historic sites, ranging from the
peaks of Karakorum to the historic civilization of Mohenjo-Daro.
Pakistan enjoys a long water coast of the Arabian Sea in its
southern region.
Tourism services such as airlines, hotels, road transport, souvenir
shops not only provide employment but also provide unique
business avenues in the diversified geographical regions of
Pakistan.
 Several resorts and farmhouses
springing up on outskirts of Karachi
Travel time to such places takes up
to 1 hour
Keenjhar Lake only one more hour
away
113 Km from Karachi on the
National Highway
Driving time (1.5 to 2 hours) perfect
for family road trip.
A destination surrounded by nature,
heritage and culture
An untapped opportunity to utilize
the serenity and the beauty of the
largest fresh water lake in Pakistan
 Largest freshwater lake in Pakistan (24 Km long, 8 Km wide,
192 Km Periphery)
Wetland of international importance (RamsarSite)
Wildlife Sanctuary and home to several species of local and
migrating birds
Major water reservoir
Perfect for short stay s away from the busy routine of city
Proximity to ThattaCity , with its rich history and culture,
enhances tourism potential
An ideal location for eco-friendly tourism and nature
Resort development can be a major economic stimulus
 The health sector is a priority for the GoP, since the high correlation between the
expenditure on health and productivity in developing countries like Pakistan emphasizes
the importance of improving health services as an aid to growth.
Per capita health expenditure in Pakistan is a meagre USD47 with GoP allocating 3% of its
total expenditure to health sector whilst the private sector provides 84% of total health
expenditure.
Health facilities in Pakistan are provided through health care delivery systems and Public
Health Intervention (PHI). Programs under PHI include National Program for prevention of
HIV / AIDS, Malaria, Hepatitis, child healthcare etc.
There are just 12 healthcare attendants (physicians and nursing staff) for every 10,000
people.
Low level of life expectancy (65 Years in 2007), high child mortality rate under 5 year age
(73/1000 in 2007) and high population growth rate at 2.1% surpassing regional average of
1.5%; indicate the increasing need for better health care and preventive services in the
country.
Only 58% of the population has access to quality sanitation as against the global average of
78%.
Sectors warranting attention include inadequate sanitation facilities, unsafe water, poor
living conditions and malnutrition.
 In Pakistan people still do not have easy access to food to meet their
basic requirements for protein and deficiency of essential micronutrients,
such as iodine, vitamin A, and iron.
Availability of major food items and its access during the year 2008-09
was maintained by taking necessary measures to combat the effects of
international price hike and shortage of grains.
The average caloric availability remained around 2363 calories per capita
per day and protein at 70gms per capita per day against the average
requirement of 2350 calories per capita per day.
Currently the GoP is taking actions to rectify the situation of shortage of
quality food supply in the country. Some of the initiatives taken are food
support programme for poor households, incentives to improve the
nutritional status of Government Rural Primary Schools, Micro Nutrient
Deficiency Control Programme etc.
 In order to provide for a fair and equal treatment to all the investors as
well as a transparent and efficient system for substantial acquisition of
voting shares and takeovers of listed companies and matters ancillary
thereto or connected therewith, the SECP has promulgated following
legal framework:
The Listed Companies (Substantial Acquisition of Voting Shares and
Takeovers) Ordinance, 2002; and
The Listed Companies (Substantial Acquisition of Voting Shares and
Takeovers) Regulations, 2008.
Takeover laws and regulations are intended to minimize price
manipulation and insider trading. Following is the summary of some
important sections of the Ordinance:
 Any person who acquires voting shares in a listed company as a result of
which his aggregate holding exceeds 10% of the voting shares, must
disclose the aggregate shareholding to the said company and to the
stock exchange on which those shares are listed, within two working
days of the acquisition. Any additional acquisition by the above person
during the next 12 months need not be disclosed until such time as the
shareholding does not cross 25%.
Simply, the disclosure is triggered on crossing the 10% voting rights
threshold. Any further purchases in the 12 months thereafter, up to 25%
of the voting rights need not be disclosed.
 When the acquirer plans to cross the 25% threshold or gain control of a
listed company, he is required to make a public announcement of offer to
acquire additional voting shares or control of such company; before
making announcement such person shall make requisite disclosures as
mentioned above.
 No acquirer, who has acquired more than 25% but less than 51% of the
voting shares or control of a listed company, shall acquire additional
voting shares or control unless such an acquirer makes a public
announcement of offer to acquire voting shares or control in accordance
with this Ordinance.
Provided that such acquirer shall not be required to make a fresh public
announcement of offer within a period of 12 months from the date of the
previous announcement.
 When an acquirer is required to make a public announcement of offer,
the acquirer shall make a public announcement of offer to acquire such
number of voting shares, which together with the existing voting shares
held by the acquirer will oblige the acquirer to acquire at least 50% of the
total voting shares of the target company.
 In addition following are the important provisions of the takeover laws:
Disclosures by the target company on possibilities of its acquisition to the stock exchange

Timing of public announcement of intention and of offer to purchase shares of the target company
beyond the specified threshold appointment of manager to the offer contents of public offering
documents

Procedures for withdrawal of public announcement of intention and of offer for purchase of shares

Size of offer, minimum offer price, mode of payment to shareholders on acquisition of shares

Form / nature of security for performance of obligation under the public offer

Obligations of acquirer, board of directors of the target company, manager to the offer

Other procedural matters including penal provisions, reporting requirements, and powers of the
SECP in the area of substantial acquisitions.
 The buyer and seller may need to consider following tax aspects:
Treatment of gain on disposal of assets / issue of shares
No gain or loss shall be taken to arise on disposal of asset from one
company to another company and no gain or loss shall be taken to arise
on issue, cancellation, exchange or receipt of shares as a result of
operation of a Scheme of Arrangement and Reconstruction under
sections 282L and 284 to 287 of the Companies Ordinance, 1984 or
section 48 of the Banking Companies Ordinance, 1962, if the conditions
stipulated in the tax laws are satisfied.
 Acquisition of an entity may involve various steps depending on the
nature, size, and complexity of the transaction and the target entity.
Following are the typical phases of acquisition of an entity:
Signing of Letter of Intent / Memorandum of Understanding between the potential
buyer and the seller
Seeking required regulatory approvals
Undertaking financial, legal, commercial and operational due diligence
Assessing value and negotiating price
Signing of Sale and Purchase Agreement
Closing the deal.

The intended buyer and seller usually engage financial consultants and
legal advisors to assist them on various phases of merger and acquisition
transactions, particularly; to perform due diligence, assess business
value, transaction structuring; and to assist on legal matters.
 The Competition Ordinance, 2007 requires that where an undertaking,
intends to acquire the shares or assets of another undertaking, or two or
more undertakings intend to merge the whole or part of their businesses,
and meet the pre-merger notification thresholds stipulated in
regulations prescribed by the Competition Commission, such
undertaking or undertakings shall apply for clearance from the
Competition Commission of the intended merger.
The aim of the Competition Ordinance and Competition Commission
established under this Ordinance is to provide for a legal framework to
create a business environment based on healthy competition towards
improving economic efficiency, developing competitiveness and
protecting consumers from anti-competitive practices.
There has been considerable merger and acquisition activity in the recent past. The
concentration of M&A activity has been observed in the financial services and telecom sectors.
Key M&A transactions during 2004-09
Target name Sector Acquirer name Stake

Orascom Construction Industries stake in Cement Lafarge S.A. 69%

Pakistan Cement Company Pakistan Cement
Company Limited

Pure Terephthalic Acid divested by AkzoNobel Chemical KP Chemical Corporation 75%

Tameer Microfinance Bank Financial Telenor Pakistan 51%

Services

PICIC & PICIC Commercial Bank Limited Financial Tamasek through 74% stake in NIB 100%
Services

Saudi Pak Commercial Bank (now Silk Bank) Financial International consortium comprising 86.55%
Services Bank Muscat SAOG, International
Finance Corporation, Nomura
European Investments Limited & Sinthos Capital
Crescent Commercial Bank Financial Services Samba Group 68.4%
(now Samba Bank)

Union Bank Financial Services Standard Chartered Bank 95.37%

Arif Habib Bank Limited Financial Services Suroor Investments led by Mr. 60%
Hussain Lawai

Bosicor and associated Oil & energy Abraaj Capital & Bosicor Corporation Limited 40% & 60%
companies (now Byco Respectively
Petroleum & Byco Chemicals
Pakistan Limited)

Karachi Electric Supply Power generation Abraaj Capital 35.8%

Corporation

Pakistan Telecommunication Telecom Emirates Telecommunications 26%

Company Limited Corporation- Etisalat

Paktel Telecom China Mobile 100%

Lakson Tobacco Company Tobacco Philip Morris International 97.62%

Limited
 Foreign exchange dealings are regulated under the Foreign Exchange
Regulation Act, 1947. Foreign currencies are made available to persons /
companies doing business in Pakistan for all purposes under rules which
have been clearly defined by SBP. There are no restrictions on availability
of foreign currency for imports (except for import of banned items or for
imports from Israel). Business houses can buy foreign currencies for all
other commercial transactions like payments for export claims,
commission payment to foreign agents on exports, royalty, franchise /
technical fees and dividends (as subsequently described in detail),
software licenses / maintenance / support fee, advertisement abroad in
newspapers and magazines, business travel etc.
Foreign investment in Pakistan enjoys full protection and repatriation
facilities. The Foreign Private Investment (Promotion and Protection)
Act, 1976 provides guarantees for repatriation of foreign investment to
the extent of original investment, profits earned on such investment, and
appreciation of capital.
The important foreign exchange regulations pertaining to foreign
investment are covered in detail hereon.
 SBP has given general permission to non-residents to purchase shares of
Pakistani companies quoted on the stock exchange irrespective of the
nature of their business, and shares of those private companies which are
engaged in manufacturing, power generation and approved segments of
service sectors. This facility is available to the following categories of
non-residents, subject to payment being made in foreign currency and
the price being not less than break-up value as certified by a practicing
Chartered Accountant in the case of unlisted shares and the market price
in case of quoted shares;
A Pakistan national resident outside Pakistan

A person who holds dual nationality including Pakistan nationality, whether living in or
outside Pakistan

A foreign national, whether living in or outside Pakistan

A firm (including a partnership) or trust or mutual fund registered and functioning

outside Pakistan, excluding entities owned or controlled by a foreign government.
 Companies are required to nominate a bank through which
they would like to make remittance of dividends to non-
resident shareholders. On receipt of nomination of a bank
from the company SBP authorizes the concerned bank to
effect remittance of dividends to the non-resident
shareholders of the company without its prior approval.
 Manufacturing sector

The SBP has laid down certain conditions for remittance of Royalty
and Technical Fee by the manufacturing sector to facilitate the
execution of agreements for transfer of technology. The local firm
would designate any of the Authorized Dealers (Banks) in foreign
exchange in Pakistan, through whom payments will be made.
 Payment of royalty, franchise / technical fee by the non-
manufacturing sector opened for foreign direct investment
like International Food Franchises is permissible, subject to
the maximum limit of USD100,000 as the initial lumpsum
payment, irrespective of number of outlets, and maximum
5% of net sales. The initial period for which such fees will be
allowed should not exceed five years.
 Remittance of royalty / franchise and technical fee or
commission / service charges for the financial sector may be
allowed by the SBP, on case-to-case basis, in respect of
foreign collaborators branded financial products / services.
The one-time lump sum up-front royalty / technical fee /
franchise fee should not exceed USD500,000. Continuing
payments should not exceed 0.25% of customers billing.
 Private foreign currency loans

Private sector entrepreneurs are permitted to obtain foreign currency

loans from banks / financial institutions abroad, parent companies of
the multinationals and as suppliers credit, not involving government
guarantee, for financing foreign currency cost of the projects covered
by the governments industrial and investment policies. The
repayment period of such loans / credit should not be less than five
years. Loan agreements and repayment schedules are registered with
SBP which enables banks to allow remittance of interest and loan
installments, after deduction of applicable tax, without further
approval of SBP.
 Individuals, firms, companies resident in Pakistan including
foreign controlled companies and branches of foreign
companies but excluding banks may obtain foreign currency
loans from abroad on repatriable basis for any purpose
subject to SBP Foreign Exchange regulations.
 Repatriable foreign currency loans by foreign controlled companies for working
capital

Foreign controlled companies (i.e. branches of foreign companies and companies

incorporated in Pakistan with 50% or more foreign share holding, or 50% or more
directors of foreign nationality) are allowed to contract foreign currency loans
from banks / financial institutions abroad or from their HO or from other overseas
branches / associates abroad for meeting their working capital requirements,
subject to the conditions that the repayment period should not exceed twelve
months and the interest should not exceed 1% over LIBOR. Such loans can
however be rolled over for further periods not exceeding 12 months each
(branches of foreign companies are not allowed to pay interest on such loans).

Foreign currency loans for working capital by Pakistani firms

Pakistani firms and companies functioning in Pakistan, excluding banks, may

obtain foreign private loans on non-repatriable or repatriable basis.
 The SBP allows prepayment of foreign private loans (other
than the Government guaranteed loans), on a case-to-case
basis. This facility can be availed by those borrowers who
have the rupee counterpart available with them or they have
the capacity to generate rupee funds themselves.
 Possession of foreign currency
There is no restriction on residents and non-residents on bringing in,
and holding foreign currency. However, there is a ceiling of USD10,000
on taking foreign currency out of Pakistan.

Foreign currency accounts (FCA)

Companies and individuals are allowed to maintain foreign currency
accounts with banks in Pakistan subject to certain conditions specified
in the Foreign Exchange Manual.
 Lending to foreign controlled companies for working capital

Authorized Dealers are allowed to grant Rupee loans and credits to foreign
controlled companies for meeting their working capital requirements.

Lending to foreign controlled companies for capital

expenditure
Foreign controlled companies engaged in manufacturing are allowed to
obtain Rupee loans for meeting capital expenditure requirement from banks,
development financial institutions and other financial institutions or by issuing
Participation Term Certificates, etc. However, other foreign controlled
companies require special permission to obtain medium and long-term Rupee
loans.
 Authorized Dealers have general permission under the
Foreign Exchange Regulations to grant Rupee loans to their
clients (including foreign controlled companies) against
guarantees of non-residents / guarantees received from
banks functioning abroad subject to compliance with the
Prudential Regulations of SBP.
Appendix I
 Business activities may be carried out through a company,
modaraba, branch, partnership or sole proprietorship.
Companies incorporated in Pakistan and branches or liaison
/ representative offices of foreign companies are regulated
by the Companies Ordinance, 1984, and Rules framed there
under, administered by SECP.
 The Companies Ordinance, 1984 mentions the following types of
companies:

Company limited by shares

The personal liability of shareholders is limited to the amount (if any) unpaid on their
shares. Effectively, the shareholder's liability does not exceed the amount committed,
when taking up the shares in the company.

Company limited by guarantee

In this type of company, the memorandum binds each member to contribute to the
assets of the company in the event of its being wound up while he is a member, or within
one year afterwards, for payment of the debts and liabilities of the company contracted
before he ceases to be a member, and of the costs, charges and expenses of winding up,
and for adjustment of the rights of the contributories among themselves, such amount as
may be required, not exceeding a specified amount.
 Unlimited company

The law also allows formation of company with unlimited liability of its
members. From a practical perspective, the limited liability company
with share capital would be the type of company contemplated by a
non-resident interested in investing in Pakistan. A company
incorporated in Pakistan, may either be a "Public Company or a
"Private Company. A public company can also be a listed company.
Companies are required to get registered under the tax laws and
obtain a National Tax Number (NTN).
 A private company can be easily formed by a
minimum of two members (except for a single
member company) and may commence its
business immediately after its incorporation. A
private company, through its Articles of Association
(AoA):

Restricts its members to transfer shares

Limits the number of its members to fifty
Prohibits any invitation to the public to subscribe for its
shares or debentures.
 An individual is entitled to obtain corporate status by forming a single
member company and avail privileges of limiting the liability. The
introduction of the concept of a single member company has facilitated
sole proprietorships to obtain corporate status, giving them the
privilege to limit the liability of their proprietors.

All the shares are vested with single member, however, he / she is
required to nominate two individuals, one of whom shall become
nominee director in case of death of the single member and the other
shall become alternate nominee director to work as nominee director in
case of non-availability of the nominee director.

Single-Member company is required to appoint a qualified company

secretary and to write SMC in addition to Private Limited with its
name.
 A public company can be formed by three members or more. It is
entitled to commence business after obtaining a commencement of
business certificate from the Registrar of Companies.

A public company does not have restrictions with regard to maximum

number of members and transferability of the shares. A public limited
company should have a minimum of three members. Public companies
have the option to get their securities listed on a stock exchange.

A company cannot be listed unless it has made a public issue which is

subscribed by at least 500 members. However this is applicable for
listing of shares. For listing of securities other than shares, minimum
number of members is three.

A listed company may buy back its own shares subject to conditions
specified in the Companies Ordinance, 1984.
 A company is governed by its Memorandum of Association
(MoA) and Articles of Association. The MoA primarily
specifies the framework of companys objectives and capital
boundaries, whereas AoA transcribes rules for conducting its
daily business in accordance with applicable laws e.g.
transfer and transmission of shares, mode of alteration in
capital, holding of meetings, voting, powers and duties of
directors and chief executive, distribution of dividends,
capitalization of profits and reserves, preparation of
accounts, winding up, etc.
 The shares are moveable property of the member and are
transferable in the manner provided in the companys AoA.

Company may have different kinds of share capital and

classes of shares with distinctive rights attached thereto, if
so provided in its constitutive documents i.e. MoA & AoA.
 Directors

The management of companies is vested in the Board of Directors and they may
exercise such powers as are specified in the AoA and the Companies Ordinance 1984.
The Ordinance has vested in members certain powers, which cannot be exercised by
the directors. The first directors are appointed by the subscribers to the MoA who shall
remain in office until the first AGM, thereafter, directors are elected by the members
for a period of three years.

A single member company is required to have at least one director, whereas every
other private limited company should have at least two directors. A public company is
required to have at least three directors in case of an unlisted company and seven in
case of a listed company. All directors must be natural persons.

Chief executive

All companies are required to appoint a Chief Executive Officer (CEO) except for a
company managed by a managing agent. The first CEO is appointed by the directors of
the company at the date of commencement of business or within 15 days from the
date of incorporation, whichever is earlier and thereafter within 14 days of the date of
election of directors.
 Statutory meeting is required to be held by a public company limited by shares or limited
by guarantee having share capital, within a period of not less than three months nor more
than six months from the date the company is entitled to commence business.

First Annual General Meeting (AGM) of the members (shareholders) is required to be held
not later than 18 months from the date of incorporation and subsequently once every
calendar year within a period of four months following the close of its financial year, and
not more than 15 months after holding the last AGM.

Any general meeting other than the AGM shall be called an extraordinary general meeting
(EoGM). The directors, at any time, may call an EoGM to consider any matter which
requires the approval of the company in a general meeting and shall, on the requisition of
members representing not less than one-tenth of the voting power on the date of the
deposit of the requisition, forthwith proceed to call an EoGM.

The directors can meet as many time as they require, however, directors of a public
company are required to meet at least once in each quarter of a year.
 Some of the important provisions of the Companies Ordinance 1984,
relating to accounts and audit are summarized as follows:

Accounts preparation & approval

Every company is required to prepare annual accounts including balance sheet and
profit & loss account whereas listed companies are also required to prepare cash flow
statement and statement of changes in equity.

Every listed company is required to prepare quarterly accounts within one month of the
close of first and third quarter of its year of account and within two months of the close
of the second quarter, and transmit the same to the members and stock exchanges on
which it is listed

The directors of every company shall present balance sheet and profit and loss account
in the AGM not later than 18 months after the date of incorporation and subsequently
once at least in every calendar year.

Directors report shall be attached with the accounts in the prescribed manner.
 Audit of accounts

Following companies are required to have their accounts audited by a

Chartered Accountant;

a public company
a private company, which is a subsidiary of a public company, or;
a private company having a paid-up capital of PKR3 million or more.

The first auditor is required to be appointed by the directors within 60

days from the date of incorporation and thereafter in each AGM of the
company.

A public listed company shall ensure that its half-yearly financial

statements are subject to limited scope review by statutory auditors.
 Circulation & submission of accounts
Every company shall send a copy of the audited accounts, directors and auditors reports to all
members at least 21 days before AGM and shall keep a copy at the registered office of the company
for the inspection of the members of the company during a period of at least 21 days before that
meeting.

A listed company shall, simultaneously with dispatch of the aforementioned accounts and reports,
send five copies to SECP, the stock exchange and the registrar.

Listed companies are required to submit three copies and other companies are required to submit
two copies of annual accounts along with reports and documents required to be annexed to
Registrar of Companies within 30 days from the date of AGM.

In case of a private limited company having share capital not exceeding PKR7.5 million, there is no
requirement to submit annual financial statements to Registrar of Companies.

Under the code of corporate governance, all listed companies shall publish and circulate quarterly
un-audited financial statements along with Directors review on the affairs of the listed company for
the quarter.
 The Companies Ordinance, 1984, requires companies incorporated in
Pakistan to file various statutory returns relating to meetings of
members, issuance and allotment of shares, appointment of and change
in directors, chief executive and auditors, annual audited accounts,
annual list of members etc. with the Registrar within the prescribed time
limits.

Similarly, foreign companies (liaison offices and branch offices) are also
required to file various statutory returns relating to their incorporation,
principal place of business and particulars of Directors and Principal
Officer, etc.

The SECP vigilantly monitors the affairs of entities under its purview. This
is done through off-site monitoring of companies on the basis of reports
and returns furnished by them as well as through on-site inspections of
companies.
 The effort is targeted at ensuring compliance of the regulated entities with
applicable laws and regulations and protecting the interests of the investors,
depositors and other stakeholders.

Recently SECP has developed an e-Services project which is an electronic data

gathering and retrieval system that would perform automated collection,
acceptance and forwarding of submissions by companies who are required by law
to file forms and documents with the SECP. Its primary purpose is to increase the
efficiency of the corporate sector for the benefit of investors, companies, and the
economy by accelerating the receipt, acceptance and dissemination of time
sensitive corporate information filed with the SECP.

Main features of the system include online registration of companies, reservation

of name, change in name and address of the company, online submission of
annual, quarterly, and monthly returns by companies and tracking of complaints,
etc. The system will also aim to reduce undue paper work and improve various
processes within SECP.
Appendix II
 Apart from Companies Ordinance, 1984, there is a host of other Corporate
Legislations in force regulating different aspects of corporate entities. These are
enumerated as follows:

Non-Banking Finance Companies (NBFCs) and Notified Entities Regulations,

2008

These regulations are applicable to NBFCs carrying out leasing, investment

finance services, housing finance services, asset management services,
investment advisory services including their business activities and to the notified
entities being managed by such NBFCs. NBFCs include Private Equity and REITs.
 Fund Management Company (FMC) is licensed by Commission to operate as
NBFC providing PE & VC Fund Management Services and its activities are
governed by these regulations in addition to NBFC Regulations 2008. Minimum
paid up capital requirement of FMC is PKR30 million and no fund is allowed to
operate without registration with Commission. These regulations also cover
matters like obligations of and restrictions on FMC, appointment of Trustee,
cancellation of license or registration of fund, investment conditions and
restrictions etc.
 It regulates the activities of REIT Management Company (RMC) and the
registration and regulation of REIT scheme and for matters connected
therewith and incidental thereto. There are two types of REIT schemes,
namely rental and developmental. The minimum paid up capital at the
time of application should be PKR50 million and is required to be
increased to PKR500 million within 30 working days subsequent to
registration of the REIT scheme. The minimum fund size of REIT scheme
is PKR5 billion and real estate shall be within the limits or surrounding
areas of Islamabad, Rawalpindi, Karachi, Lahore, Peshawar or Quetta. A
REIT scheme shall not undertake more than one real estate project. An
RMC shall not hold less than 20% and not more than 50% of the units of
the REIT managed by it, unless otherwise permitted by the Commission.
 Takaful rules were ssued by SECP for the conduct of takaful operations in
the country. Takaful refers to Islamic way of insurance. A Takaful operator
may underwrite any or all classes of Takaful business, provided approval
is obtained from the Commission. A Takaful operator shall maintain and
administer following funds, a) Participants Takaful Fund; and b)
Shareholders Fund.

Each Takaful operator shall appoint a Shariah Board of not less than three
members which shall be responsible for the approval of products,
documentation as well as approval of all operational practices and
investment of funds which shall be filed with the Commission.
 Insurance Ordinance regulates the formation and activities of insurance
companies. Insurance rules are issued in conjunction with Insurance
Ordinance and contain detailed operational and reporting guidance and
procedures.
 No Modaraba can be floated unless an authorization is
obtained by the Registrar of Modaraba Companies under the
provisions of this Ordinance.
 The main law relating to the Stock Exchanges, Brokerage Houses,
Central Depository and Credit Rating Agencies in Pakistan is the
Securities and Exchange Ordinance, 1969 which regulates and governs
the establishment and running of these entities in Pakistan.
The main law governing the establishment and operations of
banking companies in Pakistan is the Banking Companies
Ordinance, 1962.
 A company that seeks to offer its shares to the public and
wishes to apply for a listing on the Stock Exchange must
comply with the listing requirements of the Exchange, in
addition to compliance with the provisions of the Companies
Ordinance, 1984. The requirements of the Exchange relate to
management and company procedures, disclosures,
provisions concerning the issue of prospectus for the issue of
shares to the public, distribution of financial statements and
other matters to keep the public and the exchange(s)
adequately informed on all aspects of the affairs of the
company, which may affect the market value of its shares.
 Issue of capital is mainly governed by the Companies
Ordinance, 1984, Companies (Issue of Capital) Rules, 1996,
Listing Regulations, and Regulations governing Over-The -
Counter (OTC) market and criteria for listing framed there
under.

The main requirements of listing on the ready market are:

minimum paid up capital of PKR200 million
public offer of equity has to be subscribed by at least 500 applicants
the offering document has to be cleared by the KSE before it is
submitted to the SECP for approval.
 A maximum period of three months will be taken from the
date of receipt of listing application completed in every
respect along with offering document, for the grant of
permission by KSE.
 Under the Listing Regulations, every company proposed to
be listed on the stock exchanges shall make offer to the
public as follows:

In case capital of company is up to PKR500 million, at least

50% of such capital shall be offered to the public; and

In case capital of company is beyond PKR500 million, public

offer shall be at least PKR250 million or 25% of the capital,
whichever is higher.
 The objective of code of corporate governance is to establish
a framework of good corporate governance for the listed
companies. This has been incorporated in the listing
regulations and broadly covers the matters relating to board
of directors, corporate ownership structure and divestiture of
shares by sponsors / controlling interest, internal audit,
external auditors, audit committee, and corporate and
financial reporting framework.
Appendix III
 This Ordinance relates to the formation of trade unions, the
regulation of relations between employers and workmen and
the avoidance and settlement of any differences or disputes
arising between them or related matters. In its ambit the
Ordinance includes trade unions and freedom of association,
registration of trade unions, workers' participation and
dispute resolution, labour courts, authorities, decisions,
settlements and awards, penalties and procedures etc.
 Every industry or establishment with five or more employed
persons is required to get registered under the Act. Recent
amendments have extended the applicability of this Act for
employees of banks or banking companies. The contribution
is made at 5% of workers wages by the employer and such
contribution cannot be recovered in any manner from the
employee; whereas, employee will make a contribution
equal to 1% of his wages. Wage refers to wage defined in
The Minimum Wages for Unskilled Workers Ordinance, 1969
which is PKR6,000. The minimum old-age benefit under this
Act is PKR2,000 per month.
 This act is applicable on every employee in the
private sector, corporations and autonomous or
semi-autonomous bodies whose terms and
conditions of employment are negotiable through
collective bargaining under the Industrial Relations
Ordinance, 2008. The act entitles the employee a
cost of living allowance equal to PKR 100 per month
to be paid by the employer.
 Under this Ordinance, any industrial establishment as
defined in the Ordinance, having total income is PKR500,000
or more is required to pay 2% of its total income under the
Income Tax provisions, to the Workers' Welfare Fund. The
Ordinance has extended the scope of industrial
establishment by including establishments formed under
West Pakistan Shops and Establishment Ordinance, 1969,
resulting in every business concern, having total income of
PKR 500,000 or more in a tax year, being liable to WWF.
 According to this Ordinance, the amount of minimum wages for
unskilled worker should not be less than PKR 7,000.
 The Ordinance provides for the wages, leaves, holidays,
working hours, overtime, maintenance of statutory records
of leaves etc. It applies to all shops and establishment where
any workman is employed.
 A company engaged in industrial undertaking, if the number
of workers employed at any time during a year is 50 or more,
or the paid up capital as on the last day of the accounting
year is PKR5 million or more or the value of fixed assets as on
the last day of the accounting year is PKR20 million or more,
is required to establish a Workers' Profit Participation Fund
and pay to it, 5% of its profits every year. A workers share in
the fund depends on the category of his average monthly
salary.
 Every industrial or commercial establishment, where 20 or more workers
are employed, is required to comply with the conditions of employment
of workmen and other incidental matters contained in the standing
orders. Commercial establishment includes all kinds of commercial
establishments such as, advertising agency, hotel, restaurant, bank,
insurance company, etc., and an industrial establishment includes
factory, mine, construction industry, etc. An amount equal to the wages
of the workers has to be paid during the period of suspension.
 The standing orders cover the following matters relating to employment of
workmen:

Classification of workmen into permanent, temporary, probationers, etc.

Terms and conditions of service to be given in writing

Publication of working time and holidays

Details as to shift working, terms of attendance, leave, terms of wages and group incentive schemes

Compulsory group insurance of permanent workmen against death, injury or disability not covered
by Workmen Compensation Act, 1923

Terms and conditions governing stoppage of work, closure of establishment, terms relating to
termination of employment, governing payment of gratuity or other termination benefits

Compulsory payment of bonus in case the employer is making profit.

 This Ordinance is applicable only to such areas, classes of
persons, industries or establishments with regard to such
benefits, as the Government may specify from time to time
in this behalf. The benefits provided by this scheme are
medical care, maternity benefit, death grant, pre-natal and
post-natal care, injury benefit, disablement pension,
disablement gratuity. Employees drawing wages up to
PKR10,000 fall under the ambit of this Ordinance.
Employers Social Security contribution has been capped at
6%.
 The Factories Act is applicable to almost all the industries. According to
the Act, "Factory" means any "Premises" or "Precincts" thereof, in which
a manufacturing process is being ordinarily carried on with or without the
aid of power.
The Act deals with following aspects relating to working conditions for
workers:
Daily and weekly working hours
Intervals for rest
Weekly holidays
Compensatory holidays
Extra pay for overtime
Annual holidays
Casual leave or sick leave
Special provisions for adolescents and children
Health and safety measures, etc.
 Under this Act, the employer is liable to pay compensation to
workers for accidents arising out of and during the course of
employment. The rates of compensation for death,
permanent total disablement, permanent partial
disablement and temporary disablement have been given in
the Act. The amount of death and permanent disablement
grant is PKR 200,000.
Appendix IV
 Bilateral Investment Treaties
List of Countries / Organizations with which Pakistan has Bilateral Investment Agreements

S. No. Name of Country Signing Date S. No. Name of Country Signing Date

1 Australia 07.02.1998 25 Malaysia 07.07.1995

2 Azerbaijan 09.10.1995 26 Mauritius 03.04.1997

3 Bangladesh 24.10.1995 27 Morocco 16.04.2001

4 Belarus 22.01.1997 28 Netherlands 04.10.1988

5 Belgium 23.04.1998 29 Oman 09.11.1997

6 Belgo-Luxemburg Economic Union 23.04.1998 30 Philippines 11.05.1999

7 Bosnia 04.09.2001 31 Portugal 17.04.1995

8 Bulgeria 32 Qatar 06.04.1999

9 Cambodia 27.04..2004 33 Romania 10.07.1995

10 China 12.02.1989 34 Singapore 08.03.1995

11 Czech Republic 07.05.1999 35 South Korea 25.05.1988

12 Denmark 18.7.1996 36 Spain 15.09.1994

13 Egypt 16.04.2000 37 Sri Lanka 20.12.1997

14 France 01.06.1983 38 Sweden 12.03.1981

15 Germany 01.12.2009 39 Switzerland 11.07.1995

16 Indonesia 08.03.1996 40 Syria 25.04.1996

17 Iran 08.11.1995 41 Tajikistan 13.05.2004

18 Italy 19.07.1997 42 Tunisia 18.04.1996

19 Japan 10.03.1998 43 Turkey 15.03.1995

20 Kazakhstan 08.12.2003 44 Turkmenistan 26.10.1994

21 Kuwait 17.03.1983 45 U.A.E. 05.11.1995

22 Kyrgyz Republic 23.08.1995 46 United Kingdom 30.11.1994

23 Lebanon 09.01.2001 47 Uzbekistan 13.08.1992

24 Loas 23.04.2004 48 Yemen 11.05.1999

Appendix V
Organisation Web Address
Sindh Board of Investment (SBI) www.sbi.gos.pk
Board of Investment, Pakistan www.pakboi.gov.pk
Federal Board of Revenue www.fbr.org.pk
Ministry of Finance www.finance.gov.pk
Securities & Exchange Commission of www.secp.gov.pk
Pakistan
State Bank of Pakistan www.sbp.gov.pk
Alternative Energy Development Board www.aedb.org