Islamabad: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb on Thursday chaired the second meeting of the Committee constituted to develop a National Private Equity Policy Framework aimed at strengthening Pakistan's private equity ecosystem and facilitating greater mobilisation of domestic and international long-term capital for productive investment.
At the outset of the meeting, the Committee congratulated the Finance Minister on Pakistan's successful US$3 billion dual-tranche Eurobond issuance and noted the strong and diversified participation of international investors.
The Finance Minister observed that the positive response from global capital markets reflected growing confidence in Pakistan's economic direction and provided an encouraging backdrop for efforts to deepen the equity side of the capital market and broaden sources of long-term financing.
Senator Aurangzeb recalled that dedicated work streams had been established following the Committee's first meeting to advance work on regulatory, taxation, institutional investment and other policy areas.
He appreciated the progress made and emphasised that the objective should be to translate these work streams into a coherent, practical and implementable framework capable of mobilising actual investment while maintaining appropriate regulatory safeguards and fiscal discipline.
The Committee reviewed progress on the regulatory work stream, including measures under consideration by the State Bank of Pakistan to facilitate institutional participation, investment, repatriation and exit, as well as appropriate accounting treatment for private equity investments.
The discussion also covered the treatment of such investments under existing banking and IFRS requirements, with emphasis on creating an enabling environment for institutional investors, including banks, Development Finance Institutions, insurance companies and pension funds, while ensuring compliance with applicable prudential and accounting standards.
The Committee discussed the principle of tax neutrality for private equity structures to ensure that the pooling structure itself does not create an additional layer of taxation while preserving taxation at the level of those ultimately earning the income.
Members also examined existing income-distribution requirements applicable to funds and considered ways to facilitate genuine investment without creating opportunities for tax arbitrage or erosion of the tax base.
Appropriate disclosure, registration and anti-avoidance safeguards were emphasised as integral components of the proposed framework.
The meeting also considered the tax treatment of capital gains in private-company transactions, with members stressing the importance of a framework that does not unnecessarily discourage legitimate investment and exits while maintaining safeguards against undervaluation and other potential misuse.
The discussion highlighted the need for transparent, credible and reliable valuation mechanisms, drawing where appropriate on internationally recognised private equity valuation practices.
Progress on the proposed legal and regulatory framework for private equity and venture capital, including ongoing work by the Securities and Exchange Commission of Pakistan, was also reviewed.
The Committee discussed ways to broaden the domestic institutional investor base and develop a regulatory architecture that provides greater clarity and certainty to investors and fund managers.
Senator Muhammad Aurangzeb said private equity represents an important asset class for mobilising patient, long-term capital into businesses and productive sectors of the economy.
He said a stronger domestic private equity ecosystem could help businesses access growth capital, strengthen domestic investment and entrepreneurship, support employment and productivity, and provide investors with additional avenues for deploying long-term capital.
The Finance Minister stressed that the framework should not merely create additional financial structures but should mobilise actual capital and translate it into tangible investment outcomes.
He emphasised the need to develop a credible domestic ecosystem capable of attracting Pakistani and international investors, building local fund-management capacity and progressively connecting Pakistan's businesses and investment opportunities with deeper pools of institutional capital.
The Committee agreed that the regulatory, taxation and legal work streams would continue close coordination and consolidate their recommendations into a coherent national framework.
Relevant institutions were directed to continue their respective assessments and technical work so that outstanding issues could be progressively resolved and recommendations brought back to the Committee.
The Finance Minister stressed the need to maintain momentum and move from policy design towards implementation through a clear and sequenced approach.
He said the ultimate objective was to establish a competitive, transparent and well-regulated private equity environment capable of broadening Pakistan's financing landscape, complementing traditional bank and capital-market financing and channelling more long-term capital towards productive economic activity.
The meeting concluded with broad agreement to advance priority recommendations and continue work towards an overall National Private Equity Policy Framework incorporating safeguards against misuse and arbitrage while creating conditions for the sustainable growth of Pakistan's private equity market.
The meeting was attended by Adviser to the Prime Minister for Industries and Production Haroon Akhtar Khan, Adviser to the Prime Minister on Privatisation Muhammad Ali, Minister of State for Finance Bilal Azhar Kayani, Secretary Finance Imdad Ullah Bosal and other members of the Committee from the relevant public and private sectors.