The Economic Coordination Committee (ECC) of the Cabinet has reportedly linked permission to remit millions of dollars to M/s Eastern Products Private Limited (EPPL) in Saudi Arabia subject to clearance certificate from National Accountability Bureau (NAB), well-informed sources told Business Recorder.
Sharing the details, the sources said, Finance Division informed the ECC that M/s Eastern Products Private Limited (EPPL), Pakistan has approached the State Bank of Pakistan through its authorized, Bank Alfalah, to seek approval of outward remittance of SAR 22.5 million ( approx $ 6 million) for acquisition of 50 per cent shares of M/s Sinsina Industrial Works and Metal Construction Company Ltd(SIW) Jubail, Saudi Arabia.
In order to liberalize and deregulate the country's economy, the Federal Cabinet in its meeting held on May 16, 2001 allowed equity based investment abroad by resident Pakistani companies on the basis of a set criteria. The criterion further stipulated that cases of private sector would be dealt by SBP as decided by the ECC, and was later amended by the ECC on August 29, 2002 when it was decided that proposals of up to $ 5 million would be approved at the level of SBP.
SIW, Jubail has entered into a contract to sell 50 per cent shares each to EPPL, Pakistan and Sinsina Corner Co (SCC) for contracting for a total of SAR 45 million. EPPL, Pakistan is primarily engaged in the import, processing, blending, packing and distribution of tea with the brand name of ' Vital Tea'. Through its sister concerns, EPPL, Pakistan also has business concerns in food, agriculture, chemicals and personal care( Vital Agro Chemicals Private Limited and Vital Soap & Chemicals Private Limited ). SIW, Jubail deals in steel fabrication and diversified steel products catering to the needs of oil and gas sector, petrochemicals, power and cement industries. The nature of business of SCC, Riyadh, the second buyer, was similar to that of SIW, Jubail.
Finance Division further claimed that the SBP has supported the acquisition of 50 per cent stakes in SIW, Jubail by EPPL, Pakistan after carrying out a detailed analysis in accordance with the criteria laid down by the ECC and the condition for equity investments abroad under the Foreign Exchange Manual,2019. In its analysis, the SBP is said to have reported that: (i) Saudi Arabia allows free repatriation of profits and capital and as foreign investors, are allowed to sponsor foreign employees, the proposed venture is likely to create employment opportunities for around 235 Pakistanis;(ii) although the proposed investment in EPPL, Pakistan is in an unrelated line of business, but entering with an experienced local industry partner, that is, SCC, Riyadh would help to counter the risks of business failure. EPPL, Pakistan also foresees the potential to acquire sufficient expertise from running the business as it intends to be part of potential Saudi investment in Gwadar in the future;(iii) EPPL, Pakistan meets the criterion of financial soundness as it is a well-capitalized cash rich entity being managed through 100 per cent reinvestments of retained earnings since 2015. The profit after tax has increased significantly in recent years and the company has neither long-term nor short-term borrowings from banks or financial institutions; and (iv) with its supply linkages with Saudi Aramco and the expected Saudi investments in economic cities and railways projects in the near future the business projects of SIW, Jubail appear sound. The proposed investment is expected to generate dividend repatriation of around SAR 49.5 million( approx.$ 13 million) over the next five years besides $ 1 million remittance inflow as a result of employment generation for Pakistanis.
Finance Division proposed that as equity investment abroad exceeds $ 5 million, approval of the ECC was required for remittance of SAR 22.5 million( approx. $ 6 million) for acquisition of 50 per cent shares by EPPL, Pakistan in SIW, Jubail, Saudi Arabia.