KARACHI, Nov 25: NBP Exchange Company Ltd has got the State Bank licence to work as a foreign exchange company and its management says the company will start operations from January 1 2003.

“We have got the first SBP licence for an exchange company and will start operations from January 1,” said managing director of NBP Exchange Company Ltd. Muhammad Naeemuddin.

Chief Executive of H&H Exchange Company Ltd. Haji Haroon said his company had also got the SBP licence adding that the company would start operations sometimes next month.

NBP Exchange Company is a wholly owned subsidiary of state-run National Bank of Pakistan and is set to start business with a paid-up capital of Rs300 million. Talking to Dawn Naeemuddin said that the board of directors of the company has been constituted with NBP President Syed Ali Raza as chairman. He said the company would be headquartered at Shaheen Complex in Karachi but it would start operations simultaneously from five other cities. These are (i) Lahore (ii) Rawalpindi (iii) Faisalabad (iv) Gujrat and Gujranwala. “We will expand our network to Mirpurkhas in AJK and Peshawar by March 2003 besides setting up two branches in Karachi — one in Clifton and the other in Nazimabad.”

NBP Exchange Company and H&H Exchange Company are two of the 10 exchange companies that have so far got the SBP licence to start operations as foreign exchange companies. The other eight companies that have got an initial No Objection Certificate from the central bank but are yet to fulfil other formalities to get licences are: (i) Khanani & Kalia International (ii) Dollar East (iii) Galaxy International (iv) Zarco (v) Global Exchange Company (vi) Universal Exchange Company (vii) Pak-Kuwait Exchange Company and (viii) Sheikh & Khawaja Exchange Company.

The foreign exchange companies that are being set up as part of a plan to phase out money changers will buy and sell foreign currencies in cash and will also make electronic transfer of funds. They are also permitted to buy and sell foreign exchange in the inter-bank market. These companies will chiefly focus on handling foreign exchange coming from overseas Pakistanis. The SBP has laid down a set of rules for these companies that would prevent them from indulging in money laundering and other bad practices.

The exchange companies are being set up to enable the SBP to monitor inflows and outflows of foreign exchange more closely than in the case of 400 plus money changers. The setting up of the exchange companies has the blessings of the IMF that has its reservations about not-so-transparent working of money changers. The money changers have been given two years time to either convert their businesses into exchange companies or pack up and quit. They have asked the central bank to let them work side by side with the foreign exchange companies.

Haji Haroon of H&H Exchange Company told Dawn that his company would be headquartered in Saima Towers on I.I. Chundrigar Road Karachi. He said the company would set up a branch in Islamabad within one month after commencing operations.

H&H Exchange Company is co-sponsored by Haji Haroon of Dubai Exchange International and Muhammad Yousuf Rao who is a member of Lahore Stock Exchange.

NBP Exchange Company and H&H Exchange Company have already been incorporated under the companies rules by Securities & Exchange Commission of Pakistan. Now after receiving the State Bank licences to work as foreign exchange companies the only thing they need to do is to make sure that internal systems are ready to operate. The officials of the two companies claim that everything is just ready. But insiders say they need to have a fool-proof computerized trading system in place — and that may take a couple of weeks.