Implementation of Performance Evaluation System for Equity Investment Abroad

Performance Evaluation System for Investment Abroad System for Performance Evaluation of Investment Abroad User Manual 1.0 User Manual 1.0 Prepared by: Prepared by: Exchange Policy Department Exchange Policy Department

1. ACRONYMS, Abbreviations and Definitions

2. ACRONYMS, Abbreviations and Definitions Sr. no. ACRONYMS/ Words Definitions & Explanations Sr. no. ACRONYMS/ Words Definitions & Explanations 1 CNIC Computerized National Identity Card of Investor or Shareholders of investing/investee entity as the case may be 1 CNIC Computerized National Identity Card of Investor or Shareholders of investing/investee entity as the case may be 2 ECC Economic Coordination Committee of the Federal Cabinet 2 ECC Economic Coordination Committee of the Federal Cabinet 3 EPD Exchange Policy Department 3 EPD Exchange Policy Department 4 EIA Equity Investment Abroad 4 EIA Equity Investment Abroad 5 FERA Foreign Exchange Regulation Act, 1947 5 FERA Foreign Exchange Regulation Act, 1947 6 ESOP Employees Stock Option Plans 6 ESOP Employees Stock Option Plans 7 DAP Data Acquisition Portal of State Bank of Pakistan 7 DAP Data Acquisition Portal of State Bank of Pakistan 8 Designated Authorized Dealer A bank designated by SBP under Category A1, A2, B & D of Equity Investment Abroad Policy to process EIA transactions 8 Designated Authorized Dealer A bank designated by SBP under Category A1, A2, B & D of Equity Investment Abroad Policy to process EIA transactions 9 DFS Data File Structure 9 DFS Data File Structure 10 HoldCo Holding Company formed under Category B of EIA policy 10 HoldCo Holding Company formed under Category B of EIA policy 11 Investee Company Company in which investment is made by the applicant 11 Investee Company Company in which investment is made by the applicant 12 NTN National Tax Number of Investing Entity 12 NTN National Tax Number of Investing Entity 13 OpCo Operating Company as referred in Category B of EIA policy 13 OpCo Operating Company as referred in Category B of EIA policy 14 Portfolio Investment Investment in listed shares under Category D of the policy 14 Portfolio Investment Investment in listed shares under Category D of the policy 15 RAS SBP’s Regulatory Approval System 15 RAS SBP’s Regulatory Approval System 16 Resident Company Code Code of the applicant company available on DAP 16 Resident Company Code Code of the applicant company available on DAP 17 SBLC Standby Letter of Credit 17 SBLC Standby Letter of Credit 18 SBP State Bank of Pakistan 18 SBP State Bank of Pakistan 19 SPV Special Purpose Vehicle 19 SPV Special Purpose Vehicle 20 Sweat Equity Shares acquired against services rendered under Category D of EIA policy 20 Sweat Equity Shares acquired against services rendered under Category D of EIA policy

3. Project Background & Overview

4. Project Background & Overview Exchange Policy Department (EPD), one of the core departments of State Bank, is responsible for regulating Pakistan’s foreign exchange regime. Exchange Policy Department (EPD), one of the core departments of State Bank, is responsible for regulating Pakistan’s foreign exchange regime. The department is engaged in process of exchange policy formulation and implementation to bring the country’s foreign exchange regime in line with Federal Government’s and SBP’s policies. The department is engaged in process of exchange policy formulation and implementation to bring the country’s foreign exchange regime in line with Federal Government’s and SBP’s policies. The Exchange Policy Department, being part of the Banking Policy and Regulations Group, reviews the existing rules and regulations on continuous basis to facilitate foreign exchange activities in the country. The Exchange Policy Department, being part of the Banking Policy and Regulations Group, reviews the existing rules and regulations on continuous basis to facilitate foreign exchange activities in the country. Foreign exchange business in Pakistan is governed / regulated under Foreign Exchange Regulation Act, 1947 (FERA, 1947). Foreign exchange business in Pakistan is governed / regulated under Foreign Exchange Regulation Act, 1947 (FERA, 1947). Foreign Exchange Manual outlines the rules and regulations governing foreign exchange business in the country for the guidance of Authorized Dealers (ADs), and general public including local/ foreign investors as well as other stakeholders. Foreign Exchange Manual outlines the rules and regulations governing foreign exchange business in the country for the guidance of Authorized Dealers (ADs), and general public including local/ foreign investors as well as other stakeholders. The changes in instructions/ policies/ procedures are brought through F.E. Circulars/ Circular Letters issued by EPD. The changes in instructions/ policies/ procedures are brought through F.E. Circulars/ Circular Letters issued by EPD.

The Investment Abroad and Commercial Remittance Division of EPD has a mandate for the implementation/ compliance of the government policies relating to current & capital account transactions. The Investment Abroad and Commercial Remittance Division of EPD has a mandate for the implementation/ compliance of the government policies relating to current & capital account transactions. The capital account transactions include Equity Investment Abroad (EIA) by domestic corporates, FIs & individuals [through Employees Stock Option Plans (ESOP), investment in listed shares and sweat equity]. The capital account transactions include Equity Investment Abroad (EIA) by domestic corporates, FIs & individuals [through Employees Stock Option Plans (ESOP), investment in listed shares and sweat equity].

Recently, with the approval from Federal Government, EPD, vide circular # 01 dated July 11, 2024, issued revised policy on EIA, as contained in Para 13, Chapter 20 of Foreign Exchange Manual, under which the resident individuals and companies can undertake EIA transactions under following five categories: Recently, with the approval from Federal Government, EPD, vide circular # 01 dated July 11, 2024, issued revised policy on EIA, as contained in Para 13, Chapter 20 of Foreign Exchange Manual, under which the resident individuals and companies can undertake EIA transactions under following five categories: i. Category-A1: Establishment of subsidiary/branch/liaison/marketing office abroad by companies operating in the IT sector. i. Category-A1: Establishment of subsidiary/branch/liaison/marketing office abroad by companies operating in the IT sector. ii. Category-A2: Establishment of subsidiary/branch/liaison/marketing office abroad by companies (other than companies in the IT sector) for promoting exports. ii. Category-A2: Establishment of subsidiary/branch/liaison/marketing office abroad by companies (other than companies in the IT sector) for promoting exports. iii. Category-B: Establishment of Holding Company (HoldCo) abroad by resident companies for raising capital from abroad. iii. Category-B: Establishment of Holding Company (HoldCo) abroad by resident companies for raising capital from abroad. iv. Category-C: Investment abroad by resident companies for expansion of business. iv. Category-C: Investment abroad by resident companies for expansion of business. v. Category-D: Investment abroad by Resident Individuals v. Category-D: Investment abroad by Resident Individuals

While function of approving EIA transactions under category “A1”, “A2”, “B” & “D” has been delegated to ADs subject to obtaining SBP’s acknowledgment of designation of bank and observing the relevant instructions, the function of approving the EIA proposals under category “C” resides with SBP. While function of approving EIA transactions under category “A1”, “A2”, “B” & “D” has been delegated to ADs subject to obtaining SBP’s acknowledgment of designation of bank and observing the relevant instructions, the function of approving the EIA proposals under category “C” resides with SBP. Further, the function of approving EIA transactions from ESFCA under category A1 & A2 has also been delegated to ADs subject to observance of relevant instructions. Further, the function of approving EIA transactions from ESFCA under category A1 & A2 has also been delegated to ADs subject to observance of relevant instructions.

Nevertheless, the ADs are under obligation to maintain record of proposals approved either by them or SBP in both soft and hard form. Nevertheless, the ADs are under obligation to maintain record of proposals approved either by them or SBP in both soft and hard form. Additionally, the EIA policy mandates that Designated ADs/ADs retain records of post-approval activities, such as funds remitted by the applicant, details of entities established or acquired abroad, and the repatriation of profit, dividends, royalties to Pakistan, among other relevant transactions. Additionally, the EIA policy mandates that Designated ADs/ADs retain records of post-approval activities, such as funds remitted by the applicant, details of entities established or acquired abroad, and the repatriation of profit, dividends, royalties to Pakistan, among other relevant transactions.

The EIA policy also obligates Designated ADs/ADs to assess the performance of entities formed or acquired abroad on an annual basis. The EIA policy also obligates Designated ADs/ADs to assess the performance of entities formed or acquired abroad on an annual basis. This evaluation includes a review of key financial indicators and an analysis of the benefits these entities provide to Pakistan's economy, particularly in terms of the repatriation of profit, dividends, and royalties. This evaluation includes a review of key financial indicators and an analysis of the benefits these entities provide to Pakistan's economy, particularly in terms of the repatriation of profit, dividends, and royalties.

While Designated ADs/ADs are currently maintaining manual record of pre and post EIA approval activities, it has been decided to create a central repository, in parallel, at SBP where data related to all such activities can be captured in soft form. While Designated ADs/ADs are currently maintaining manual record of pre and post EIA approval activities, it has been decided to create a central repository, in parallel, at SBP where data related to all such activities can be captured in soft form.

The repository has been named as “Performance Evaluation System for Investment Abroad (PESIA)” in which banks are required to upload data of various EIA approval activities on different Data File Structures (DFS) systematically through Data Acquisition Portal (DAP) on the prescribed frequency. The repository has been named as “Performance Evaluation System for Investment Abroad (PESIA)” in which banks are required to upload data of various EIA approval activities on different Data File Structures (DFS) systematically through Data Acquisition Portal (DAP) on the prescribed frequency. DAP users of banks can access the relevant portal, by logging in with their existing DAP credentials, at the following link: DAP users of banks can access the relevant portal, by logging in with their existing DAP credentials, at the following link: https://daplive.sbp.org.pk/ https://daplive.sbp.org.pk/

Moreover, the DAP users can download all the DFS (MS Excel Files) by using following navigation within DAP: Moreover, the DAP users can download all the DFS (MS Excel Files) by using following navigation within DAP: Click “Knowledge Centre” and then click “Acquired Data”. Click “Knowledge Centre” and then click “Acquired Data”. On the “Acquired Data” page, please select “Equity Investment Abroad” from the list of values contained in “Business Area” tab. On the “Acquired Data” page, please select “Equity Investment Abroad” from the list of values contained in “Business Area” tab. On “Equity Investment Abroad” page, please select the relevant DFS and download it in MS Excel format by expanding the section “List of Documents”. On “Equity Investment Abroad” page, please select the relevant DFS and download it in MS Excel format by expanding the section “List of Documents”.

3. Data File Structures
4. Data File Structures The Designated ADs/ADs shall report data of EIA approval activities carried out during a month, in respect of DFS no. 1 to 9 through DAP latest by 5th working day of the following month. The Designated ADs/ADs shall report data of EIA approval activities carried out during a month, in respect of DFS no. 1 to 9 through DAP latest by 5th working day of the following month. As regards reporting on DFS No. 10, Designated ADs/ADs shall report data on annual basis within three months of the close of financial year of investee entity: As regards reporting on DFS No. 10, Designated ADs/ADs shall report data on annual basis within three months of the close of financial year of investee entity:

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4. Procedure for Obtaining Investee Company Code

5. Procedure for Obtaining Investee Company Code The ADs/Designated ADs shall forward the details as per following variables, at Helpdesk.PESIA@sbp.org.pk, for obtaining “Investee Company Codes”. The ADs/Designated ADs shall forward the details as per following variables, at Helpdesk.PESIA@sbp.org.pk, for obtaining “Investee Company Codes”.

6. Responsibilities of Authorized Dealers and Designated Authorized Dealers

7. Responsibilities of Authorized Dealers and Designated Authorized Dealers It shall be the responsibility of Head of EIA Unit, established under FE Circular no.1 dated February 10, 2021, and Group Head Compliance of each bank to ensure that the data is submitted strictly in line with the aforesaid instructions. It shall be the responsibility of Head of EIA Unit, established under FE Circular no.1 dated February 10, 2021, and Group Head Compliance of each bank to ensure that the data is submitted strictly in line with the aforesaid instructions. Further, they shall be responsible to ensure data integrity and accuracy. Further, they shall be responsible to ensure data integrity and accuracy. In the event it is observed that the aforesaid responsibilities have not been fulfilled by them and the reported data is inaccurate, SBP shall take appropriate enforcement action against the delinquent ADs/Designated ADs and/or their staff under relevant provisions of FERA or other applicable laws. In the event it is observed that the aforesaid responsibilities have not been fulfilled by them and the reported data is inaccurate, SBP shall take appropriate enforcement action against the delinquent ADs/Designated ADs and/or their staff under relevant provisions of FERA or other applicable laws.