February 7, 2003	Friday	Zul Hijjah 5,1423

KARACHI, Feb 6: When people walked in the glass-studded office of the first foreign exchange company located on Ziauddin Ahmed Road here on Thursday they were both skeptical and hopeful:

“I just went to make some inquiries there,” a young man at the doorsteps of H&H Exchange Company told Dawn. “I wanted to know if the remittances sent in from my relatives abroad would be treated as legal transfers.”

“Certainly yes,” replied chief executive of the company Haji Haroon when he was asked the same question by Dawn. But sources inside the company said the company had asked the State Bank to clarify this issue in writing. A central banker reached by Dawn said people should not have any doubt about the legality of the money transferred through foreign exchange companies. But he did not say whether the SBP would take the trouble of issuing some clarification about it — or the rules already laid down for the foreign exchange companies were enough to make this point clear.

“With the first foreign exchange company being in operation now we hope that money laundering would stop,” commented another young man who had visited the exchange company to sell dollars.

The CEO of the first foreign exchange company claimed that his company quoted the same exchange rates for the US dollars as were prevailing in the open market — Rs 57.90/Rs 57.95 for spot buying and selling. He said his company would set up a booth at Karachi Airport sometime next month to provide currency exchange facility to the travellers.

The State Bank has so far issued operation licences to three foreign exchange companies including H&H. NBP Exchange Company which is a wholly-owned subsidiary of state-run National Bank is expected to start operations by the middle of this month. KKI Exchange Company says it would start working sometime next month.

Foreign exchange companies would gradually replace the money changers whose businesses had never been documented and monitored properly. There are more than 400 licensed money changers in the country. Forex Association of Pakistan —an unregistered body claiming to represent them — says money changers should be allowed to operate side by side with the exchange companies. One of the key differences between the operations of exchange companies and money changers is that the former are required to have a minimum paidup capital of Rs 100m whereas the latter can start business with a paidup capital of Rs 2.5m that must be doubled if they set up multiple branches. The other difference is that whereas exchange companies are allowed to handle electronic transfer of money—the money changers are not. It is a separate story, however, that they generally manage to handle TTs anyway.