KARACHI, Nov 20: The investment of Pakistani firms and individuals in foreign securities and business has taken a big jump specially in the Middle East and Malaysia.

Official statistics show that holdings by Pakistani nationals tripled in foreign securities from Rs51 million in 1998 to Rs153 million in 1999. A stock broker says that about half a dozen security houses are now competing for foreign securities business that had picked recently for want of substantial local investment avenues and the trend towards globalization.

The State Bank allows small investments by individuals in a few shares of listed companies abroad including participation by local employees of subsidiaries of foreign companies in Pakistan in their option plans without detailed scrutiny.

Similarly, the investment (net creditor position) of Pakistani firms operating abroad increased by Rs1,732 million to Rs4,364 million.

The lion’s share of the investment flowed into UAE. In a single year, the net investment more than doubled from Rs1,119 million to Rs2,962 million.

Other major investments (net creditors position) were as follows: Saudi Arabia Rs482 million, Malaysia Rs265 million, Libya Rs204 million, Singapore Rs48 million, Hong Kong Rs42 million and UK Rs37 million and Germany Rs2.1 million. Another Rs303 million is invested in countries classified as “others.”

Pakistani investments were liquidated in Lebanon, Sri Lanka and Nigeria in mid-1990s and in Afghanistan prior to 1990.

These investments include those made by multinationals operating in Pakistan and joint venture investments made by major banks in the public sector. HBL-ABL have set up recently a subsidiary in the UK and NBP-UBL are in the process of doing so to merge and manage their branches in Europe.

In a bid to globalize the operations of the local companies, the State Bank decided recently to allow local residents to make equity based investment (other than portfolio investment) in companies (whether incorporated or not) and joint ventures abroad on repatriable basis, with prior permission of the Central Bank.

The investment abroad is allowed from inter-bank market or funds in foreign currency accounts. The investor is required to repatriate dividend/ disinvestment proceeds of the shares (including capital gains) to Pakistan through normal banking channel.

This decision taken by the State Bank on September 1, 2001 was a departure from past practice of allowing firms to invest abroad from purchases made from kerb market and to remit profits/proceeds of disinvested shares through normal banking channels.

The decision by the State Bank, market sources say, may promote more investments abroad by residents and may help bring money in the informal sector into the banking channel.