While the inflow of fresh Foreign Direct Investment (FDI) into the country is indeed very low and well below the country‘s potential, it does not accurately reflect the total level of investment by the foreign investors in Pakistan. Humayun Bashir, President Overseas Investors Chamber of Commerce and Industry (OICCI), stated this while commenting on an item in the State Bank’s 3rd Quarterly 2012 report that reports that the FDI in Pakistan has declined substantially. The SBP report does not take into account the amount of profits retained in the country and ploughed back by the foreign companies operating in Pakistan for new investment in acquiring plant and machinery, equipment, software, warehouse facilities and other tangible and intangible investments. Moreover, the accumulated profit and free reserves are also used by these companies to partially settle the outstanding loans or for increasing their paid up capital, where needed. This same amount would have been counted as foreign direct investment if the investing companies/banks would have gone through the process of remitting it out of the country as dividend, after paying applicable taxes thereon, and then remitted the same amount inward into the country for new investment. Bashir said OICCI was presently conducting a quick survey among its members to determine the level of investment made during 2010 and 2011 by these member companies out of their retained profits which otherwise would have been remitted abroad. Based on the data currently available from about 45 percent of its 187 members, such investment during 2011 was roughly $ 1 billion. He OICCI chief indicated that OICCI would like to work closely with the SBP, Board of Investment (BOI) and Ministry of Finance to ensure that such indirect foreign investment should also be recorded in FDI statistics in appropriate manner. He was optimistic that such indirect foreign investment will get a boost as soon as the FBR issues necessary clarification on investment made under the “tax credit for equity investment scheme” announced in last year’s budget (2011-2012) under Income Tax Ordinance’s section 65 (d) and 65 ( e).
