Background of Proposal
Overses Investors Chamber of Commerce and Industry (OICCI) has officially submitted its recommendations for amendments in the State Bank of Pakistan (SBP) Foreign Exchange Manual. This paper’s discussion is restricted to royalty, franchise and technical fees (RFT) related laws, which are directly influencing foreign direct investment (FDI) in Pakistan. A letter was sent to the Minister for Power, Sardar Awais Khan Leghari, from OICCI Secretary General and CEO Abdul Aleem after the meeting conducted on August 25, 2025.
Need for Alignment with Global Markets
OICCI emphasized parallel tracking of Pakistan’s regulatory model with respect to other emerging markets. It asserted that a smooth flow of dividends, royalties, and technical fees is crucial to maintaining investor confidence. Enhanced regulation will also increase tax revenues: remittances are subject to withholding taxes under double taxation treaties. Emphasizing that current restrictive practices tend to push remittances along the informal banking channel, the chamber observed.
Current Issues with SBP Rules
Currently, recurring RFT payments are limited to a percentage of net sales, whereas internationally, the market standard is based on gross revenue. OICCI said Pakistan is likely to lose competitiveness if it fails to revamp its outdated caps. The existing RFT limit of 5 percent is considered too small in relation to international practice.
Proposals for the Telecom Sector
OICCI has recommended integrating global best practice methodologies in telecom, including service-based royalty models related to subscriber or service volumes. Amongst other things, it also proposed the option for inter-company support charges to be based on revenue share or cost base, and the option to introduce pre-agreed safe harbour levels or APAS based on a benchmarking exercise. These efforts would represent ongoing support from global headquarters in the areas of research, digital transformation, HR, and fintech.
Sector-Specific Guidance and Management Fees
We suggest that SBP publish sector-specific guidelines for telecom operators, which will allow recurring charges to be made on sales-based or service-based RFT fees. It also requested the possibility of fixed or variable management fees in the areas where quantification of services is challenging and justified by internal allocation policies. This would limit the line-by-line audit work and better represent the grouping of support services.
Proposed Financial Thresholds
OICCI suggested that the upfront lump sum fee threshold be raised from USD 100,000 to USD 300,000 to account for the growth in the business verticals. It also proposed increasing from 5 to 10 percent the limit on recurring royalty payments which would be based on net sales (after taxes and imports). Furthermore, it suggested that the tenure of RFT agreements be extended to match the 15-year tenure of telecom licenses awarded by the PTA.
Coordination with FBR
The chamber also pointed out problems related to overlap in regulation commitments between the SBP and the Federal Board of Revenue (FBR). It is advised that SBP should keep certified expenses beyond the reach of further FBR enquiry. This would remove the issue of double jeopardy on audits and, therefore, instill investor confidence.
Conclusion
With these adjustments, Pakistan can attract sustainable foreign investment and create regulatory certainty through a revised Forex Manual. Telecom royalties, management fees, and increased thresholds for financial investments are among the strategies that OICCI has recommended for Pakistan to adopt, enabling it to meet international standards while enjoying enhanced transparency and ease of doing business.
