22 July 2004	Thursday	04 Jamadi-us-Saani 1425

ISLAMABAD, July 21: The federal government on Wednesday further liberalized the foreign exchange rules and regulations for the private sector companies incorporated in Pakistan on their current (non-capital) transactions.

A decision to this effect was taken by the Economic Coordination Committee (ECC) of the cabinet here on Wednesday to minimize the involvement of State Bank in individual forex-related transactions.

The meeting, presided over by Finance Minister Shaukat Aziz, felt that some rigid controls on allocation of foreign exchange for productive purposes should be done away with and the rules and regulations further liberalised for the general benefit of the people.

According to the summary prepared by the finance ministry and approved by the ECC, the authorized dealers (ADs) will be granted general permission to release foreign exchange to a maximum of $100,000 per invoice for all current (non-capital) remittances for private sector companies incorporated in Pakistan, with some exceptions.

The summary says, to preclude the possibility of misuse of this facility, the reporting system of the SBP will be revised to provide for party-wise periodical reporting by banks which will be scrutinized in detail by the SBP. If any such misuse is discovered, punitive action will be initiated and/or the policy suitably modified for rectification.

The ECC also decided that the authorized dealers would release Private Travel Exchange Quota (PTEQ) up to $10,000 per visit to business travellers and to all travellers per annum instead of per visit irrespective of the purpose of travel. Operational procedures for release of PTEQ shall remain unchanged.

Moreover, there will be no upper ceiling on remittances on account of import of goods as well as permissible service letters of credit. Rules relating to repatriation of export proceeds would, however, remain unchanged. Exporters have been allowed to retain up to 10 per cent of the proceeds for meeting their overseas expenses.

Also, the authorized dealers would be required to refer to the SBP if any type of transactions was not covered by these rules, or any further clarification, whenever required.

CURRENT TRANSACTIONS: The related guidelines finalized by the ECC said current transactions related to payments or receipts that involve the transfer of real or financial assets and involve trade in goods and services. The list of most common current transactions include merchandise, services, transportations and income.

The merchandise current transactions include: import and export of merchandise consisting of movable goods, merchanting (triangular) trade under back-to-back letters of credit, goods for processing which include exports and imports of goods for processing and subsequent re-export or re-import of such goods, export or import of goods for repairs and any other item permitted under the trade policy.

Current transactions in the services include travel expenses for the purpose of business, education, medical treatment, holiday, pilgrimage, seminars / conferences, sports, journalist, etc., expenses for studies abroad, service charges, international private line charges, software licence / maintenance/ support fees; engagement of consultants abroad for all kind of services to be performed whether on-shore or off-shore; overseas training of staff, seminars/conferences, costs of professional surveys/ studies/ research; reimbursement to overseas offices for centralised corporate support services rendered abroad on behalf of the local entity; advertisements abroad whether in print or electronic media and subscriptions for access to foreign electronic media.

Current transactions in the transportation sector are defined as charter hire or container hire and detention and freight on import of trade samples. In the income sector, these transactions include investment income from dividends or profits on portfolio and direct investments; interest, fee and commissions on foreign private debt; payments to expatriate employees, which include wages, salaries and other benefits paid by employers, net of their local expenditure; and visa fees collected by foreign missions.

EXCEPTIONS: The following items shall, however, continue to be governed under the existing instructions: remittances by branches/liaison offices of foreign companies, remittances of state enterprises and payments to foreign operators on account of purchase of gas and domestic crude oil, remittances of profits and head office expenses by branches of foreign banks and companies, dividends /profits on foreign equity not registered with SBP /authorized dealers (other than dividends of listed companies through SCRA), interest, fees and charges on unregistered foreign private debt, surplus passage and freight collections by shipping companies /airlines /courier companies, royalty /franchise /technical fees under continuing agreements for collaboration/transfer of technology, which require prior acknowledgement by the State Bank and commission payable to foreign agents other than by exporters, or by exporters in excess of the prescribed limits.