Pakistan Market Entry

Pakistan Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

In 2022, according to the Economist classification, Pakistan was ranked 74th out of a total of 82 countries analyzed. Although the low ranking does not reflect improvements in the areas of infrastructure and technological readiness. In recent years, the country can also boast of, for example, improved electricity availability and accelerated processing of building permits. Pakistan is increasingly trying to attract investors with new investment incentives. However, security and political risks and the fragility of the economy deter potential investors. Check smber for agriculture and fishing facts of Pakistan.

When entering the Pakistani market, we highly recommend looking for a local partner who will represent the Czech company and help with possible tenders, deals, etc. This is the most common approach given the local conditions. Although Pakistan is leaning more towards attracting foreign investors, there are still various obstacles.

Distribution and sales channels can be characterized as standard, usual in any market economy for the given type of goods. The high number of transactions carried out through so-called indentors (commission agents) is significant. Finding an executive partner is not easy – it is recommended to contact one of the chambers of commerce or an entity that is already active on the market.

ZÚ Islamabad recommends to proceed very carefully when choosing a business partner on the Pakistani side and to thoroughly check the chosen company. Pakistani companies, even properly registered ones, often use fake business activities to illegally migrate to Europe.

You can go to Pakistan by way of a business mission in cooperation with the Embassy of the Czech Republic in Islamabad as part of the pro-export project for the support of economic diplomacy (PROPED), which can primarily serve to open the door to the Pakistani market for Czech manufacturers. Pakistani representatives from the government or business spheres place great emphasis on the official sponsorship of the Czech delegation by the embassy.

Import conditions and documents, customs system, export control, domestic market protection

Pakistan’s foreign trade is almost fully liberalized; only registration is required for both Pakistani exporters and importers. Imports are slightly limited by the existence of the Restricted List and Negative List, which are not very comprehensive lists of items for which certain conditions are required to be met (Restricted) or whose importation is completely prohibited (Negative).

Customs tariffs have been reduced in recent years, but they are still substantially higher than in Europe. The current rates are 0%, 3%, 11%, 16%, 20% or 35% maximum, which mainly concerns the automotive industry. While rates for automobiles have been reduced from 75-125% to 35%, components for making more powerful cars above 800cc range from 50-100%. More detailed details can be found at the following FBR link: 2021101313103646911PakistanCustomsTariff-Ch1-97.pdf (fbr.gov.pk)

Alcoholic beverages are in the current tariff regime 2021-2022 with a rate of up to 90%. In practice, considerable delays can arise during import procedures. A special burden was also introduced from the middle of the year on luxury goods. In 2018, as well as in the first half of 2019, the government adopted various non-tariff measures that reduce imports of products into Pakistan. An example can be the restriction of food imports through the adjustment of labels and the introduction of the Halal obligation for imported foods, the restriction of payment instruments when importing goods, etc. The main goal is to start production in Pakistan. Many projects in Pakistan are implemented exclusively in the form of bilateral agreements without tendering for suppliers. Other non-tariff measures include the ban on the construction of new sugar factories and cement plants with imported technologies. In 2019, the government reduced,

Important legal standards and regulations

Legal norms, regulations and ordinances can be found at the following link: https://www.secp.gov.pk/laws/ordinances/ Companies Ordinance 1984 is the main document.

Important links to investment opportunities

Board of Investment: https://invest.gov.pk/ Pakistan Regulatory Modernization Initiative: https://business.gov.pk/ Tenders announced in Pakistan: https://www.tendersinfo.com/ global-pakistan-tenders.php Other useful links: http://www.privatisation.gov.pk/, https://www.secp.gov.pk/, http://www.finance.gov.pk/

Forms and conditions of operation on the market

Pakistan encourages direct investment, as well as joint-ventures that enable technology transfer, so it is easier to obtain a license to operate for these businesses, in cooperation with an agent/distributor or a partner company (eg under an agency or joint-venture agreement). The formation of a joint venture has a special legal regulation. The main forms of business are governed by commercial codes (The Companies Ordinance, 1984; Companies Act, 2017). A foreign firm must register a subsidiary through the Securities and Exchange Commission of Pakistan (SECP: https://www.secp.gov.pk/).

Business activity can be carried out through a company, a branch, a sole proprietorship, a sole proprietorship, or a modaraba. Modaraba is a form of financial contract in some Muslim countries where an investor (rab-ul-mal) entrusts money to a financial manager (mudarib) and any profits or losses are divided between them in an agreed manner.

  • three or more natural persons can establish a public company
  • two or more natural persons can establish a private business company
  • one natural person can establish a sole proprietorship

It is possible to establish an s.r.o., a non-profit company, or a company with unlimited liability.

Conditions for setting up an office, representation

The application is submitted to the Ministry of the Interior through the Board of Investment. Attached to the application: a company letter detailing the intended activity, a valid residence visa, police registration for residence, work permit The fee for setting up an offline company is 50,000 PKR (just under 7,000 CZK); online establishment is half fee PKR 25,000.

Main offices for company registration:

Karachi

Company Registration Office, 4th Floor, State Life Building No.2, Karachi. Phone: 021-99213272, Fax 021-99213279 Email: [email protected]

Lahore

Company Registration Office, 3rd & 4th Floors, Associated House, 7-Egerton Road, Lahore. Phone: 042- 99200274, Fax 042-99202044 Email: [email protected]

Islamabad

Company Registration Office, State Life Building, 7-Blue Area, Islamabad Phone: 051-9208740, Fax 051-9206893 Email: [email protected]

Relevant links

Companies Act 2017 https://www.secp.gov.pk/companies-act-2017/

Foreign Companies Regulations 2018 https://www.secp.gov.pk/document/foreign-companies-regulations-2018/

Marketing and communication

All common methods apply, including the Internet. The institution that enables and mediates the contacts of Pakistani producers and traders with foreign countries is the Trade Development Authority of Pakistan (TDAP) with its headquarters in Karachi. The chairman at the head of the TDAP has the rank of a government minister. Due to the economic crisis, the Pakistani market is closed to the import of foreign products, which are expensive for it. At the same time, the government is introducing restrictive measures against the import of various products (food, used cars, etc.). Both Pakistani exporters and importers must be registered. Entry into the Pakistani market must be supported by an appropriate marketing campaign and personal participation in negotiations with potential partners. Deceptive marketing practices are prohibited under The Competition Act 2010.

Previous very good knowledge of Czech, or Czechoslovak goods helps evoke the interest of Pakistani importers in the wide range of offered Czech products and technologies. In addition to participating in tenders and investment projects, it is also very beneficial to present at trade fairs, especially in the country’s business center in Karachi. Furthermore, it is effective to get involved in Czech development cooperation projects with a local implementer, if a Czech company is interested in entering the market, the Czech product can become more visible in the long term in this way. Especially if the project is implemented in cooperation with already established Czech brands, e.g. Baťa, whose stores can be seen in almost every major city in Pakistan. The new instrument of economic diplomacy in the form of a project for the support of economic activities (PROPEA) is used to establish long-term cooperation with a local (especially legal) company, which for a small fee (largely reimbursed from the PROPEA budget) will take marketing steps for the most effective and most suitable campaign for the given Czech company. You can find more information at www.propea.cz.

Issues of intellectual property protection

Pakistan is a signatory to the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The country has enacted laws on copyright, industrial designs, integrated circuit layouts, trademarks and patents. Trademark protection is traditionally weak in Pakistan, and the trademark registry does not recognize rights of prior use. The trademark names of the products of many international companies have been appropriated with impunity. Pakistan formally became the 108th member of the Madrid Protocol of the World Intellectual Property Organization in February 2021. This will enable Czech exporters to claim damage to their brands on the Pakistani market at the international level in the event that intellectual property is damaged. The agreement entered into force in Pakistan in May 2021,

Pakistan is a member of WIPO (World Intellectual Property Organization) and a signatory to three international conventions:

  • WIPO Convention (1977)
  • Berne Convention (1948, Literary and Artistic Works)
  • Paris Convention (2004, Industrial Property)

Pakistan continues to lag significantly behind the general global trend in adopting other major international conventions in the field of intellectual property rights protection. There is a major violation of intellectual property rights in the country on a large scale; produces a large number of pirated copies of movies, music, software and copies of branded clothing, shoes, cosmetics, outdoor equipment, watches, etc. Long-term criticism of this deteriorating situation and pressure from the international community and the world’s leading organizations monitoring intellectual property rights violations have resulted in several administrative actions by the Government of Pakistan:

  • establishment of the state office IPO (Intellectual Property Organization), which centrally coordinates efforts to improve the situation in the field of intellectual property
  • strengthening police powers in activities aimed at combating piracy
  • strengthening and expanding the activities of Pakistan Customs

Despite these positive steps, the situation in respect of and protection of intellectual property rights and their awareness remains very poor.

Public procurement market

Currently, the government of Pakistan is trying to increase the attractiveness of the country for the private sector. In the World Bank’s ranking of quality infrastructure, Pakistan jumped from 58th place to 13th position.

Public contracts are awarded in the form of tenders. Tenders are issued by the authority or state-owned company in charge of the area, which publishes this information on its website. Large tenders are issued mainly for companies owned by the state, which is supposed to act as a guarantor. If ZÚ Islamábád becomes aware of a tender, it enters it into the SINPRO system and at the same time informs the relevant institutions in the Czech Republic. According to local legislation, ZÚ cannot purchase tender materials for individual companies. It is essential that the Czech tender participant has a local intermediary.

In the case of state contracts, a number of bureaucratic conditions must be taken into account, which must be fulfilled. First, the company must be listed on the list of suitable suppliers and provide company documents according to the customer’s request. Sectors eligible for the PPP regime include: transport and logistics; public transport; local government services; energy projects; tourism projects; industrial projects; irrigation projects; and social infrastructure.

Relevant information about projects and tenders can be found here: https://www.ppra.org.pk/ https://www.pppa.gov.pk/ at the federal level, or https://ppp.punjab.gov.pk/ in the province of Punjab.

Payment terms, payment ethics and resolution of commercial disputes

Payment and delivery terms

When delivering goods, the obligation of the contracting parties is determined by the commercial clauses of INCOTERMS 2000, of which the FOB clause is most often used, when the risks and costs are transferred to the buyer during delivery on board the ship, until then the seller pays all costs, including any fees or taxes. and CFR, when risks and costs only pass to the buyer at the agreed destination. Globally recognized payment conditions are used in payment relations with Pakistani business partners, and most often payment is made through an irrevocable documentary letter of credit. Pakistani banks are not used much in business dealings with the Czech Republic, payments are made through almost all European or Czech banks. Payment to the recipient can be made either in the recipient’s country of origin or in the country from which the goods are imported.

Resolution of commercial disputes

The standard resolution of commercial disputes takes place according to the legal order derived from the legal system of Great Britain. If the dispute cannot be avoided by perfect contractual arrangements, it is strongly recommended to have the law of the Czech Republic or Great Britain and settlement of the dispute outside of Pakistan. There is a trade dispute resolution mechanism between foreign and Pakistani entities under the Trade Development Authority of Pakistan (TDAP). ZÚ Islamabad does not yet have any experience with this mechanism. The judicial system in Pakistan is bureaucratic and the resolution of disputes before the courts is lengthy.

Visas, fees, specific conditions for traveling to the territory

To apply for a business visa, prepare:

  • a passport that is valid for at least six months at the time of application
  • photograph
  • proof of registration of the company sending the invitation (SECP/chamber of commerce confirmation)
  • one of the following options: letter of recommendation from the chamber of commerce of the relevant foreign country (CR), invitation from a business organization from Pakistan (request this document through Pakistan’s E-Business Invitation Letter system https://ebil.nadra.gov.pk/ ), or a letter of recommendation from the ZÚ trade council

From January 1, 2021, visa applications can only be processed through Pakistan’s online visa system. More detailed information about the new system can be found here: https://visa.nadra.gov.pk/ Business visa costs from 100 to 200 USD.

For more information on the visa policy of Pakistan, see the website of the Ministry of Interior: www.interior.gov.pk

There are certain health risks associated with traveling to Pakistan. It is recommended to take some vaccinations depending on the length of stay and the places visited. Malaria and dengue fever are at risk in some areas of the country. We recommend thoroughly familiarizing yourself with the local security situation, avoiding large gatherings and movement near military and police units. We recommend voluntary registration using the MFA DROZD internet application. ZÚ Islamabad warns against traveling to tribal areas (FATA, KP, Pakistan-Afghanistan border) and Balochistan province.

In Pakistan, you drive on the left. Road conditions and driving standards in Pakistan can be challenging. In the event of an accident, immediately call the police or the ZÚ emergency line and keep calm. Vehicle insurance is not mandatory under Pakistani law. If you have a business partner in Pakistan, they will offer and arrange transportation for you throughout your stay in Pakistan. If you are going to the country for the first time for a business meeting, it is also possible to rent a vehicle from internationally recognized car rental companies such as Hertz or Avis. A Toyota Corolla type car costs around CZK 700 per day, an SUV or jeep costs around CZK 1,300 per day, and minibuses, minivans from CZK 2,000-3,500. Mass transport in the European sense does not exist here; another transport option is a taxi.

The reference point is the shopping center in sector F/6. In general, hotels of international quality such as Marriott, Serena, Movenpick, PC or Sheraton are recommended.

Employment of citizens from the Czech Republic

Czech citizens working in Pakistan are mainly employed by foreign companies on the basis of a contract. The terms of employment are similar to the British legal system, which has been adopted and partially modified into Pakistani legislation. Visa requirements must be met. An employment permit can be obtained from the Board of Investment; the work permit is issued based on the recommendation of the Board of Investment and the statement of the Ministry of Foreign Affairs and the Ministry of Interior in Pakistan. The process is quite lengthy and administratively demanding.

Foreign workers with a work permit can open an account in most banks in Pakistan. A valid ID is required. The bank may have additional requirements depending on your residence, account type, business or source of income. The minimum wage is set at PKR 25,000 by the new government, which roughly amounts to CZK 3,100 per month.

In the healthcare sector, there is a system of state and private healthcare facilities, including charitable ones (both Muslim and Christian). There is an insufficient level of health care in the countryside. Emergency health care is generally provided free of charge, but its quality is questionable. Paid health care at private clinics is at a relatively good level. In quality facilities, the Czech patient must expect higher costs than in the Czech Republic and direct payments. Measures are in place in the country to control endemic diseases. However, in recent years, the number of cases of some serious diseases such as malaria, meningitis, tuberculosis, rabies and typhus has been increasing. Pharmacies are available and some are open 24/7, especially in cities and hospitals.

Fairs and events

The following overview shows the most interesting trade fairs that will be held in the second half of 2022 and in 2023 in Pakistan. The sectoral focus of the recommended trade fairs corresponds to the regularly updated map of global industry opportunities, which identifies as the most promising fields for Pakistan the construction industry, energy industry (construction of power blocks, installation of steam-gas plants), water management industry, ICT and engineering industry (modernization of production base), and infrastructure modernization (construction of roads and highways, transport and railway connections, modernization of telematics systems), defense industry (modernization of the armed forces and security forces), textile and footwear industry (modernization of the production base) and, last but not least, agriculture and food industry (dairy products, mainly whey and milk powder, as well as grain, buckwheat, flour, edible fats and acetic acid have great export potential in this segment). The participation of companies in specialized international and regional exhibitions and fairs is an effective tool for promotion and establishing business contacts. Major Exhibitions and Fairs in Pakistan in 2022/2023:

  • ITCN Expo (ICT): 24-26 August, 2022, Karachi
  • PHARMA ASIA (pharmaceutical industry): 13.-15. September, 2022, Karachi
  • IFTECH Pakistan (Food Industry): 22-24 September 2022, Lahore
  • Electricity Pakistan (energy industry): 22-24 September 2022, Karachi
  • International Health Exhibition & Conferences (healthcare industry): 10.-12. September., 2022, Lahore
  • SOLAR PAKISTAN (renewable sources): 13.-15. September, Karachi
  • INTERNATIONAL ENGINEERING & MACHINERY ASIA: October 2022, Lahore
  • SOLAR & WINDTECH ASIA (Renewables): October 2022, Lahore
  • WATER TECH ASIA (Renewable Resources): October 2022, Lahore
  • AUTO, TRANSPORT & LOGISTIC ASIA (automobiles, transport): November 2022, Lahore
  • CEPEC – CONSTRUCTION EXPO (construction industry): 17.-19. December 2022
  • IDEAS 2022 (Defence Industry): November 2022, Karachi
  • IT SHOWCASE PAKISTAN (Information Technology): April 2023

More information can be found here: https://www.eventseye.com/fairs/c1_trade-shows_pakistan_1.html

Pakistan Market Entry