KARACHI: Foreign investors have come out with all guns blazing against the Board of Investment and other “relevant ministries” for turning a blind eye to their plethora of problems, including the holdup in dividend repatriation.

The representative body of more than 200 largest multinationals operating in Pakistan has written a letter — seen by Dawn — to the prime minister, saying they’ve not been able to send dividends to their overseas shareholders for the last 10 months, which is causing the country a “serious reputational damage”.

Foreign exchange reserves of the country are barely able to cover one month’s import bill, forcing the government to stop large dollar outflows, including those by overseas investors.

A majority of foreign companies in Pakistan mostly sell products and services within the domestic market, generating rupee-denominated sales and profits. But the subsequent profit repatriation to their overseas sponsors is usually in dollars, which puts the country’s already strained balance of payments under further pressure.

The holdup in the repatriation is also causing a “serious financial loss” to the multinationals because of the unprecedented devaluation in the last six months.

“The unremitted local currency dividend is shrinking continuously in the currency of the major shareholders, making the return on investment of foreign investors even less attractive,” said the letter co-signed by Overseas Investors Chamber of Commerce and Industry (OICCI) President Amir Paracha, who also serves as CEO of Unilever Pakistan Ltd, one of the largest multinationals operating in Pakistan.

There was no mention of a dollar figure for the dividends that remain on hold. However, the CEO of an investment bank, which serves large foreign clients, told Dawn on the condition of anonymity that the pending dollar dividends amounted to more than $1 billion by the end of January. These outstanding payments were in banking, food, telecom, chemical, power, tobacco, auto and energy exploration sectors.

Pakistan has a liberal foreign investment policy that allows 100 per cent profit repatriation. Multinational companies repatriated $1.6bn to their overseas headquarters in the calendar year 2021. The repatriated amount dropped to $220.1 million in the first seven months of 2022-23, down 78.3pc from a year ago.

The widespread dollar scarcity has also led banks to refuse opening letters of credit (LCs), which is causing a shortage of “critical spare parts and key raw materials” for multinationals. “Many of our members have had to close down, some partially, their manufacturing operations and lay off workers as well,” the letter said.

OICCI said its members belonging to the pharmaceutical sector are “unable to survive” amid high inflation. Many international pharmaceutical companies have already exited the Pakistani market in which “all prices are fixed” by the government. “Remaining companies are also finding it difficult to continue to operate,” it added.

“Right now, the confidence of most of the OICCI members is shaken… unless immediate confidence-building measures are taken, there’s a danger of a direct hit to the loss of revenue to the government besides other negative implications to the economy,” it said.

Published in Dawn, March 14th, 2023