PAK-OMAN INVESTMENT COMPANY
Decision taken to further promote economic ties between the two countries
From YOUSAF RAFIQ
SPECIAL CORRESPONDENT, ISLAMABAD
Oct 04 - 10, 1999
During the 3rd Session of Pak-Oman JMC a decision was taken to set up the Pak-Oman Investment Company (POIC) for promoting economic ties between the private sectors of the two countries. A Formation Committee was constituted in the sponsors' meeting held in Oman at the time of Pak-Oman JMC meeting. Subsequently, the first meeting of the Formation Committee was held in Karachi in December 1997 and following steps were initiated: (i) KPMG Taseer Hadi Khalid Company was engaged as consultants; (ii) the status of Non-Banking Financial Institution was proposed for POIC; and (iii) draft memorandum and articles of association of the company on the pattern of Pak-Kuwait, Pak Libya and Saudi-Pak were proposed.
Meanwhile, the State Bank of Pakistan observed that the Pakistani sponsoring institution were from the public sector which were soon to be privatized. A summary was then moved to Cabinet Committee on Privatization for guidance that decided that the Board of Investment in coordination with the Privatization Commission should explore the participation of private sector investors in the proposed joint venture in the first instance. If this effort is not successful, only then the public sector institutions may be considered as partner, in the joint venture.
Accordingly, the Board of Investment contacted leading private sector Banks (i) Muslim Commercial Bank, (ii) Allied Bank, (iii) Askari Bank for inducing them to participate in POIC. However, these institutions showed no interest in this proposal. BOI reported the position to Finance Division with the suggestion that the POIC may be set up in the public sector. The Finance Division, subsequently contacted Privatization Commission on the issue. The Privatization Commission replied with the proposal that the BOI may explore opportunities outside the banking sector and place an advertisement in the press for soliciting expressions of interest from the private sector as well as from the public sector agencies which are not being privatized.
BOI is of the opinion that the Privatization Commission's suggestion is unrealistic. The fate of the proposed project has been in doldrums for the last about two years. For avoiding further delays, the BOI has proposed the following: (i) Pakistan's public sector institutions, as initially proposed, may be allowed to participate in the project; or, (ii) incentives/exemptions for the new company may be spelled out to allure private investment. Failing that the project may be abandoned.
In pursuance with Prime Minister's directives, the Finance Division issued notifications declaring Housing and Construction as industry. Housing and Construction activities are covered under Service Sector in the existing investment Policy. Thus investment in this sector is eligible for two incentives i.e. levy of 10 per cent customs duty and no sales tax on import of plant, machinery and equipment (PME) and First Year Allowance (FYA) at the rate of 50 per cent of cost of PME. The tariff incentive has been given legal cover vide SRO 28(I)/98 dated 17-1-1998. Since Housing and Construction have now been notified as industry, it is therefore felt that it may be shifted to an appropriate category of industries of the Investment Policy. For this purpose, Category © of Investment Policy provides almost similar incentives package as available to Service Sector i.e. levy of 10 per cent import duty and admissibility of First Year Allowance at the rate of 70 per cent of cost of PME. The Board of Investment has proposed, it is learnt, that Housing and Construction may be placed under category 'C' (Priority Industries) of the Investment Policy and accordingly necessary amendment may be incorporated by the CBR in SRO 26(I)/98 and 28(I)/98 dated 17th January, 1998. However, full duty exemption provided to the machinery items as contained in Table-III of Section 18 of the Customs Act and as amended vide Finance act 1999-2000 will continue to be available according to provisions therein.
EARTH MOVING MACHINERY
During Investment Conferences, held recently by the Board of Investment in Middle Eastern Countries, it was found that sizable Pakistanis have invested in the Gulf and Saudi Arabia in the sector of Transport and Heavy Duty earth moving machinery and other relevant equipment which are now lying idle due to slow down of economic activity in these countries. Overseas Pakistanis have proposed to allow the duty free import of used heavy duty earth moving/construction machinery on non-repatriable basis. The Board of Investment has recommended that the used construction machinery may be allowed for import to Pakistan under NRI-Scheme with the levy of 10 per cent customs duty. However, import of road/transport vehicles may be excluded from this provision.