ISLAMABAD, Oct 13: The government has enhanced the ownership rights to 100 per cent from 51 per cent for both domestic and foreign companies in life, non-life and general insurance business in a bid to attract foreign direct investment (FDI) in the sector.
A senior official told Dawn on Friday that the insurance sector was liberalised following bigger demand from the foreign insurance companies desirous to operate with 100 per cent equity in Pakistan.
The government, except the insurance sector, has allowed all other services-based sectors to hold 100 per cent equity. Due to this restriction, the insurance industry did not grow in Pakistan at a pace as it developed in other countries of the world.
The official said that Prime Minister Shaukat Aziz had approved the proposal in the recently held meeting of the Economic Coordination Committee (ECC) of the federal cabinet.
The official said that the commerce ministry had proposed to the government to allow foreign insurance companies to hold 100 per cent equity in life, non-life and general insurance business with the conditions for bringing in a minimum of $2 million in foreign exchange and raising an equivalent amount from the local market.
It was also decided that there would be no restriction on the number of branches and to whom they shall employ, said the official and added the foreign companies would be treated at par with the domestic companies.
When contacted Secretary Commerce Syed Asif Shah told Dawn his ministry moved the proposal on a feedback received from various insurance companies which intended to carry out investment in the sector.
He, however, said that this granting of 100 per cent ownership rights has not been committed with the World Trade Organisation (WTO). This means that Pakistan could retract this right to foreign companies from 100 per cent to any level.
The general insurance was the only area which was gearing up to grab new business opportunities that were emerging from a fast track privatisation programme, growing construction industry, increasing international trade and equally expanding domestic wholesale and retail trade.
When contacted Dr Ashfaq Hassan Khan, adviser to finance ministry, told Dawn the opening of the insurance sector would help attracting foreign companies to invest in the sector, which has enormous potential.
He said the liberalisation of the insurance sector was very much part of the financial reform process, which was delayed due to some problems. He said like banking sector, the insurance sector would also attract foreign players to get benefits from growing economy of Pakistan.
Answering a question he said that it would be premature to guess that how much investment would be attracted following opening of the insurance sector.
During the last three years, the government raised Rs240 billion by privatisation of 26 big public sector companies. The international trade during the year 2005-06 exceeded $44 billion and services sector that has wholesale and retail trade as big components were now more than 50 per cent of Pakistan’s economy.
All these economic developments have offered business opportunities to the general insurance companies.
