The government of Pakistan has permitted the repatriation of Rs600 million to a foreign firm after a decade. The repatriation of the proceeds took place after the intervention from the United States.
American Life Insurance Company (Alico) initiated operations in Pakistan in May 1994. MetLife purchased Alico (US), which had a majority stake in Alico Pakistan in 2010.
MetLife later sold its 81% shareholding in Alico Pakistan. The transfer of ownership took place in two tranches in 2014 and 2015.
Alico Pakistan was a local company listed at the Pakistan Stock Exchange (PSX). Alico (US) asked the State Bank of Pakistan (SBP) to allow the repatriation of the proceeds from the sale.
A quarter of the proceeds were repatriated during that time but the central bank did not provide permission regarding the remaining amount totaling Rs600 million.
The SBP did not grant permission owing to a letter from the Finance Division which declared the capital issued in the insurance business in adherence to the Insurance Act as “non-repatriable”.
In 2013, MetLife’s counsel received confirmation in writing from the Securities and Exchange Commission of Pakistan (SECP). The confirmation said that based on the insurance governing laws, there was no bar on the repatriation of foreign investment made in locally listed companies.
The SECP communicated with MetLife that the issue pertaining to the repatriation of sale proceeds of Alico Pakistan’s shares will be decided by the Ministry of Finance after consultation with the State Bank.
The central bank issued a letter dated January 27, 2020, highlighting that permission from the Finance Division is mandatory for remittances of divestment proceeds of non-repatriable investment of MetLife.
According to the Finance Division, the claim that the capital issued in the subject case could not be repatriated was made by the Department of Insurance of the Ministry of Commerce on June 13, 1995. It also said that the Ministry of Commerce gave a similar opinion in its letter dated September 13, 1995.
Hence, the Finance Division’s recommendation to the central bank on September 25, 1995, was based on the opinion of the Department of Insurance and the Ministry of Commerce.
The matter was deliberated upon by the US government at a meeting on the Trade and Investment Framework Agreement in May 2019. The US has consistently raised the issue in almost every bilateral engagement since then. After the last inter-ministerial meeting held on July 6, 2021, the Finance Division said 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 then requested to allow repatriation of funds of Alico/ MetLife in accordance with the rules and regulations.