INVESTMENT CLIMATE

Equity Market
In 1991, the secondary market was opened for foreign investors on an equal basis with the local investors. This measure along with the government policy of privatisation has resulted in rapid growth of the market since 1991. It may also be mentioned that "privatisation" has bee n adopted as a philosophy and most of the business & finance activities which were previously reserved for the public sector have now been opened for the private sector. The change of policy is most visible in the financial sector where a number of commercial banks, investment banks, discount houses, leasing companies, modarabas, life insurance companies and mutual funds have been allowed in the private sector.

Liberalisation policy has led to rapid deregulation of the national economy and the impediments to private initiative have been speedily removed. Foreign exchange holdings and transfers have been liberalised, industrial sanctioning has been done away with except for few sectors where, for strategic reasons, prior permission of the government is necessary.

Legal Framework
The securities market and the corporate sector are regulated by the provisions of :

1. The Companies Ordinance 1984;
2. The Securities and Exchange Ordinance 1969 and Rules framed thereunder in 1971;
3. The Securities & Exchange Commission Act 1999.

There are also Federal legislations relating to specific areas like:

1. Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970;
2. Investment Companies and Investment Advisors Rules 1971;
3. Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980;
4. Companies (Issue of Capital ) Rules 1996;
5. Leasing Companies (establishment and Regulation) Rules 1996;
6. Asset Management Companies Rules 1996;
7. Insurance Companies Ordinance 2000;
8. Guidelines for insiders trading.

In addition to above, the listed companies are also subject to the Rules and Regulations of the stock exchanges.

The Regulator
The regulatory authority for the securities market and corporate sector in Pakistan is the Securities and Exchange Commission of Pakistan. The Commission was established on January 01,1999 by dissolving the Corporate Law Authority which was formed in 1981 under a Special Law. The Commission administers the compliance of the Corporate laws in the country. The Commission is run by the Commissioners under a Chairman.

The Asian Development Bank's Capital Market Development Programme envisaged the conversion of CLA into Securities and Exchange Commission of Pakistan, as an autonomous regulatory authority. The new system provides administrative, operational and financial autonomy to the Commission and at the same time provides an accountability mechanism through establishment of a Securities and Exchange Policy Board. All policy decisions are made by the Board on the recommendations of the Commission which is also empowered to take suo motto action. The Board is directly answerable to the Parliament.

Members of the stock exchanges are also subject to the discipline of self-regulation under various Rules and Regulations of the stock exchanges. Self-Regulation is the essence of market regulation and for this purpose the legal framework has been amended to facilitate the attainment of SRO status by the stock exchanges.