ISLAMABAD: The Government has decided to allow an American firm, M/s Alico, to repatriate money of Metlife Alico after Commerce Ministry accepted its fault in interpretation of decision of the Economic Coordination Committee (ECC_ taken in 1993. well informed sources told Business Recorder.
Sharing the details, the sources said, Commerce Division apprised the Cabinet on October 5, 2021 that M/s Alico (USA) operated in Pakistan from 1951-1972. It later re-established a life insurance business in Pakistan in May 1994. MetLife purchased Alico (USA) in 2010 which held majority shares in Alico Pakistan. Subsequently, MetLife decided to sell its 81 percent shareholding in Alico Pakistan, the sale of which was enacted in two phases in 2014 and 2015.
At the time of sale, Alico Pakistan was a local company listed on the Karachi Exchange. Alico (USA) applied to the State Bank of Pakistan (SBP) for permission to repatriate the proceeds of this sale. One quarter of the sale proceeds were repatriated after the transaction, but the SBP did not grant permission to repatriate the remaining three quarters of the proceeds (Rs 600 million) based on the declaration by the Finance Division on September 25, 1995 that the capital issued in insurance business as per Insurance Act was non-repatriable, a contention sourced to an interpretation of the Insurance Act of 1938, which had been repealed years ago.
In preparation for the sale, in 2013, MetLife counsel reached out to the Securities and Exchange Commission of Pakistan (SECP) and received written confirmation from the SECP that according to insurance governing laws there was no bar on repatriation of foreign investment made in locally listed companies. Additionally, SECP maintained that the matter of repatriation of proceeded of Alico (USA) from sale of shares in Alico Pakistan, acquired through initial investment and subsequently by issue of right shares, was to be decided by Ministry of Finance in consultation with State Bank of Pakistan, keeping in view the related investment policy.
The State Bank of Pakistan in its letter of January, 27, 2020 stated that remittance of divestment proceeds of non-repatriable investment of Metlife required specific permission of Finance Division.
Finance Division subsequently stated that the opinion that the capital issued in the subject case was non-repatriable was given by Department of Insurance to the Ministry of Commerce on June, 1995 and that Ministry of Commerce in its letter of September 13, 1995 reiterated a similar opinion while referring to an ECC decision of October 14, 1993. Resultantly, Finance Division’s communication of September 25, 1995 to the State Bank of Pakistan was based on the opinion received from the Department of Insurance and the Ministry of Commerce.
The matter was raised in the TIFA inter-sessional meeting of May, 2019 at the US government level. Since then, the US had been consistently raising this matter in almost every bilateral engagement as a major trade irritant particularly in terms of the overall investment and business climate of the country. In this regard, a series of Inter-Ministerial meetings had been held between Ministry of Finance, Ministry of Commerce, State Bank of Pakistan, Securities Exchange Commission of Pakistan and Board of Investment.
Following the last Inter-Ministerial meeting held on July 6, 2021 in Ministry of Finance, Finance Division stated that it was of the view that the decision of the ECC and relevant laws did not place any restrictions on repatriation of disinvestment proceeds. The matter had been deliberated upon in Ministry of Commerce, and Ministry of Finance concurred with Finance Division’s view on this matter. The Ministry of Commerce was now of the opinion that the stance taken earlier on the matter was based on incorrect interpretation/reference of the ECC decision of October 14, 1993. The cabinet was, therefore, requested to allow repatriation of funds of Alico/ Metlife as per rules and regulations.
After detailed discussion the Cabinet approved the summary of Commerce Ministry, after the latter accepted its fault in interpretation of ECC decision.
Copyright Business Recorder, 2021