The policy of obtaining a prior security clearance for the companies seeking incorporation with foreign investment in Pakistan or foreigners intending to invest in local companies has been relaxed by the Interior Ministry.

The ministry has made the relaxations on the recommendations of the Securities and Exchange Commission of Pakistan (SECP). The security clearance no longer remains a prerequisite for the registration of companies having foreign investment and directors. According to the new policy, the SECP will issue certificate of registration to the foreign investors that will be subject to the clearance from the ministry.

The SECP will also approve the appointments of foreign directors on the boards of companies. The appointments will also be subject to provision of security clearance certificate from the ministry.

The SECP reserves the right to cancel the registration of a foreign company or appointment of a foreigner director in case the ministry of interior does not issue the security clearance for the director or company concerned after its registration.However, it would be mandatory for foreigners to file all relevant documents necessary for security clearance along with the undertaking that in case of refusal of security clearance by the ministry, the already recorded returns shall be de-registered forthwith and the directors shall be replaced.

It is pertinent to mention here that foreign investors are required to obtain security clearance from the ministry before starting their businesses in Pakistan. The delay in security clearance was considered a major discouraging factor for foreign investment and also led to many complaints.

It has also been decided that the SECP in consultation with other stakeholders -shall finalise a list of countries whose nationals should be considered for exemption from the requirement of security clearance. The nationals of these countries will be exempted from the security clearance requirement, which at the moment, applies to all foreigners serving as directors of companies operating in Pakistan.

The SECP, considering the problems faced by the foreigners and its negative impact on the investment in Pakistan, raised the issue with the ministry. The SECP did its best to get the process of obtaining security clearance streamlined for foreign investors and to remove unnecessary barriers hampering foreign investment in the country.

After vigorous consultations between the SECP and the ministry, it has been decided that the SECP shall incorporate the companies having foreign investment and record the statutory returns having foreign directors forthwith.

However, the registration of a foreign company or appoint of foreign director will be subjected to issuance of security clearance from the ministry of interior.

The decision will not only increase the foreign direct investment (FDI) in Pakistan but also increase the trust level of foreigners in the country. The FDI is vital for the healthy growth of economy and will be instrumental in restoring our investment-friendly reputation. Besides, there will be no bar on the non-resident Pakistanis to work on the boards of directors of local and foreign companies in Pakistan.