Thinking about investment in Pakistan? Before you plan a factory, a service business or a farm, it helps to know the rules of the game. The Board of Investment (BOI) publishes Pakistan's investment regime and sector policies. This guide explains how the regime works, what Investment Policy 2013 aims to do, which industries need government permission and how royalty and technical fees are treated.
Pakistan's Investment Regime in Brief
Pakistan describes its approach as a liberal investment regime, with facilitation as a cornerstone for investor confidence and a business-friendly environment that attracts both local and foreign investment.
The Board of Investment (BOI) is mandated to promote, encourage and facilitate local and foreign investment. It acts as the interface between international and local investors and between the public and private sectors, and it works to enable the business environment through policy and strategic interventions.
How Pakistan's Investment Policy Evolved
| Period | What happened |
|---|---|
| Until 1997 | Investment policy favoured the industrial and manufacturing sector. |
| 1997 | BOI framed the first Investment Policy, which opened all economic sectors, including infrastructure, social and services, to foreign investment. |
| 2013 | Investment Policy 2013 was formulated to further improve the investment climate, reflecting investment's importance for economic growth and global trends. |
Guiding Principles of Investment Policy 2013
- Reduce the cost of doing business in Pakistan.
- Reduce the processes of doing business.
- Ease of doing business through industrial clusters and Special Economic Zones.
- Link trade, industrial and monetary policies for greater convergence.
The Investment Package: Who Needs Government Permission?
The BOI page compares policy parameters across three groups of sectors: manufacturing, non-manufacturing (infrastructure and social), and services, including IT and telecom services.
- Manufacturing: government permission is not required, except for 4 specified industries (listed below).
- Non-manufacturing sectors (infrastructure, social, services including IT and telecom): government permission is not required, except specific licences from the concerned agencies.
Specified industries that need permission
Arms and ammunition • High explosives • Radioactive substances • Security printing, currency and mint • No new unit for manufacturing alcohol, except industrial alcohol
The page counts these as the specified industries, and it also adds a note that applies only to Corporate Agriculture Farming (CAF).
Royalty and Technical Fee Rules
| Sector | Royalty and technical fee |
|---|---|
| Manufacturing | No restriction on payment of royalty and technical fee. |
| Non-manufacturing sectors | Allowed as per guidelines: initial lump sum up to US$100,000, maximum rate of 5% of net sales, for an initial period of 5 years. |
Foreign Equity, Remittances and Tax Relief
The BOI page also compares remittance of capital, profits and dividends, the upper limit of foreign equity, customs duty on import of plant, machinery and equipment (PME), and tax relief through the initial depreciation allowance (IDA, as a percentage of PME cost) for each group of sectors. Check the official table for the exact current figures before you commit funds.
Frequently Asked Questions
What does the Board of Investment (BOI) do?
The BOI promotes, encourages and facilitates local and foreign investment, and acts as the interface between investors and the public and private sectors.
When was Pakistan's first Investment Policy framed?
In 1997, when BOI opened all economic sectors, including infrastructure, social and services, to foreign investment.
Do I need government permission to invest in manufacturing?
Not in most cases. Permission is required only for four specified industries, such as arms and ammunition, high explosives, radioactive substances, and security printing, currency and mint, plus the restriction on new alcohol manufacturing units other than industrial alcohol.
Are royalty and technical fees restricted?
Not for manufacturing. For non-manufacturing sectors they are allowed per guidelines: an initial lump sum up to US$100,000 and up to 5% of net sales for the first 5 years.
What are the guiding principles of Investment Policy 2013?
Lower the cost of doing business, reduce its processes, make business easier through industrial clusters and Special Economic Zones, and link trade, industrial and monetary policies.
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For video guide, view this video
Disclaimer: This article is general information based on the Board of Investment's published investment regime page at the time of writing. It is not legal, tax or investment advice. Policies and incentives can change, so confirm the latest details on the official BOI website and consult a qualified adviser before investing.
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