Congo investment: Not so Lucky Cement to send 100% dividends home

Lucky Cement has been allowed to purchase $40 million from the interbank market for setting up a cement manufacturing plant in Congo. PHOTO: FILE

ISLAMABAD: 

The government has bound Lucky Cement to send 100% dividends back home from its $40 million equity investment in Congo, which is being met from the interbank market, sources say.

To ensure that all dividends are repatriated to Pakistan, the State Bank of Pakistan (SBP) will keep a close watch on the movement of money.

Lucky Cement has been allowed to purchase $40 million from the interbank market for setting up a cement manufacturing plant in Congo, a step that comes at a time when Pakistan’s foreign currency reserves are already under strain.

According to sources, the government changed its stance following an earlier decision of the Economic Coordination Committee (ECC) in March 2013, which had asked Lucky Cement, the largest cement manufacturer in the country, to arrange foreign exchange for investment in Congo from the open market.

The new decision about purchase of $40 million from the interbank market and 100% repatriation of dividends came in an ECC meeting held on January 8 this year.

The ECC was told that the State Bank of Pakistan (SBP) had proposed remittance of $40 million for investment in Congo through incorporation of a joint venture company under the corporate umbrella of Democratic Republic of Congo.

In response to a summary submitted by the Finance Division, the ECC approved the proposal with the directive that the SBP would monitor the transfer of foreign exchange.

It was also pointed out in the meeting that purchase of dollars from the open market on a quarterly basis was not in line with the SBP’s regulations according to which corporate bodies could not generate funds from the open market.

Assessing the new proposed investment structure, the central bank recommended that Lucky Cement should be allowed to send $40 million from the interbank market on account of equity investment in Congo.

The amount would be made available in quarterly installments of $10 million each depending on the condition that the SBP would ensure that 100% dividends were sent back home.

The ECC agreed that SBP comments in the context of equity investment in Congo and establishment of a cement manufacturing plant were quite valid and criteria developed earlier for allowing investment abroad by resident Pakistanis or companies were reasonable.

However, there should be a strong mechanism to ensure full repatriation of dividends from such investments.