The government has approved the repatriation of proceeds of Rs600 million to a foreign firm after a decade following intervention of the United States.
American Life Insurance Company (Alico) began operations in Pakistan in May 1994. In 2010, MetLife purchased Alico (US), which held a majority stake in Alico Pakistan.
Subsequently, MetLife decided to sell its 81% shareholding in Alico Pakistan and the sale was completed in two tranches in 2014 and 2015.
At the time of sale, Alico Pakistan was a local company listed at the Pakistan Stock Exchange. Alico (US) sought permission from the State Bank of Pakistan (SBP) to repatriate the proceeds of the sale.
A quarter of the sale proceeds were repatriated after the transaction but the SBP did not grant permission to send the remaining three quarters of the amount totalling Rs600 million.
The decision was based on a letter of the Finance Division, which declared that the capital issued in insurance business as per the Insurance Act was “non-repatriable”.
In 2013, MetLife’s counsel got a written confirmation from the Securities and Exchange Commission of Pakistan (SECP), which stated that according to insurance governing laws, there was no bar on the repatriation of foreign investment made in locally listed companies.
The SECP also informed MetLife that the issue of repatriation of sale proceeds of Alico Pakistan shares would be decided by the Ministry of Finance in consultation with the State Bank.
On January 27, 2020, the State Bank highlighted in a letter that remittances of divestment proceeds of non-repatriable investment of MetLife required specific permission of the Finance Division.
Subsequently, the Finance Division said that the opinion claiming that the capital issued in the subject case could not be repatriated was given by the Department of Insurance of the Ministry of Commerce on June 13, 1995.
It also pointed out that the Ministry of Commerce gave a similar opinion in its letter dated September 13, 1995.
As a result, the Finance Division’s recommendation to the State Bank on September 25, 1995 was based on the opinion received from the Department of Insurance and the Ministry of Commerce.
The matter was discussed at the government level in the US during a meeting on the Trade and Investment Framework Agreement in May 2019. Since then, the US had consistently raised the matter in almost every bilateral engagement. Following the last inter-ministerial meeting held on July 6, 2021, the Finance Division stated that the decision of the Economic Coordination Committee and relevant laws did not place any restrictions on the repatriation of disinvestment proceeds.
The cabinet was, therefore, requested to allow repatriation of funds of Alico/ MetLife as per rules and regulations.
Published in The Express Tribune, October 12th, 2021.
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