Senate passes crucial bill to pave the way: Setting-up of sovereign wealth fund in sight

ISLAMABAD: The Senate on Wednesday passed a law allowing the establishment of state-owned Pakistan Sovereign Wealth Fund to stabilise the country’s economy through diversification and to generate wealth for future generations.

During the course of legislative business, a few bills were referred to the concerned committees including, The Official Secrets (Amendment) Bill, 2023 which has already been passed by the National Assembly.

Prior to presenting the bill before the House by Law Minister Azam Nazeer Tarar on behalf of the interior minister, senators belonging to both the treasury and the opposition started protesting against the bill.

The Official Secrets (Amendment) Bill, 2023 aims to amend the century-old laws by giving blanket powers to intelligence agencies, which will be able to raid and detain any citizen, even under suspicion of them breaching the law.

However, the bill was referred to the relevant standing committee of the Senate for further deliberation after it faced strong opposition from both sides of the aisle. Chairman Sadiq Sanjrani took up the agenda item for the passage of the said bill.

Govt to establish sub-funds under Pakistan Sovereign Wealth Fund: Ishaq Dar

Among few others, the House passed The Pakistan Sovereign Wealth Fund Bill, 2023, which was moved by Finance Minister Ishaq Dar after getting clause-by-clause approval. In its statement of objectives and reasons, the bill states that the legislation intends to enact the law regarding the establishment of state-owned Pakistan Sovereign Wealth Fund – the Fund.

Internationally, the primary functions of sovereign wealth funds are to stabilise the country’s economy through diversification and to generate wealth for future generations. The size and number of sovereign wealth funds continue to increase suggesting that these funds will remain a crucial part of the world economy in the future.

The bill states the objectives of the Fund; most important being the diversification and broadening of Pakistan’s economy, attracting investment from other investors for developmental projects in the country, creating investment models which promote economic growth and infrastructure development in Pakistan and increasing savings for future generations.

The bill addresses all matters pertaining to the establishment, operations and management of the Fund. In order to ensure proper control of the Fund, the bill makes it mandatory that all major decisions including investment mandate are to be made with the approval of the Supervisory Council.

The general superintendence, direction, management of the affairs and business of the Fund and overall policy making in respect of its operations shall vest in the Board which may exercise all such powers and do all such acts, deeds and things which may be exercised or done to achieve the objectives of the Fund.

The Board shall be constituted with the approval of the Supervisory Council. Moreover, for proper governance of the Fund, it is mandatory to form three independent committees, i.e., investment, audit and risk management.

The Board will also be responsible to submit periodic reports for the review and consideration of the Supervisory Council. The bill provides adequate measures for preservation of secrecy of the Fund and misuse of confidential information. Further, the accounts of the Fund shall be audited by at least one auditor of international repute.

In order to accelerate economic growth and fulfil the requirement of infrastructure development in the country, it emphasized that there is a need to make this law for the establishment of the Fund. It further stated that it is hoped that the Fund would likely decrease the dependence on the government’s resources for capital formation for long-term developmental projects.

According to the bill, the fund will be owned and controlled by the federal government with its head office to be situated in Islamabad and the Board of the Fund may also establish offices in Pakistan and abroad.

The Fund shall have perpetual succession and common seal and may sue and be sued at its own name, have independent legal personality and enjoy financial and administrative independence.

The Fund’s resources shall consist of:(i) the capital provided by the federal government; (ii) contribution from the federal government or State Bank of Pakistan; (iii) transfer of existing assets of the federal government including real estate and assets of state-owned enterprises under whatsoever arrangement; (iv) transfer of federal government shareholdings in state-owned enterprises; (v) borrowings from established and reputable financial institutions; (vi) the profits and proceeds of the investments of the Fund; (vii) any moneys received by the Fund under any contract of insurance effected by the Board; (viii) such other moneys as may vest in or accrue to the Fund, whether in the course of its operations or otherwise; and (ix) any other resources as may be approved by the Board.

The bill further stated that the authorised capital of the Fund shall be Rs100 trillion and its issued capital shall be paid in cash or in kind by the federal government. The issued capital of the Fund may be increased in the manner as provided in the regulations. The authorised capital of the Fund may be increased by a resolution of the Supervisory Counci1.

The resolution to increase the authorised or the issued capital shall be published by the Board in the official Gazette and on the website of the Fund within 15 days from the date of issue.

The Board shall apply resources of the Fund to fulfil the objectives of the Fund as per the investment mandate approved by the Supervisory Council.

It further stated that the objectives of the Fund shall be to contribute to sustainable economic development through the management of its funds and assets and achieving optimal use of them according to the best international standards and policies to maximize their value for future generations. This purpose may be achieved through the cooperation and participation with counterpart funds or other financial institutions or any of them on commercial basis to achieve the return determined by the investment policy of the Fund.

The Fund shall ensure that its investment policy is consistent with best practices with regard to environmental and social responsibility and rules of governance.

The house also passed some other bills, including The Pakistan Civil Aviation Bill, 2023, The Pakistan Air Safety Investigations Bill, 2023, and The National Commission for Human Development (Amendment) Bill, 2023.

In his brief statement in the House, the law minister revealed that the suspended flights of the Pakistan International Airlines (PIA) are expected to resume by October end or early November.

The senators also criticised the “hasty” process of legislation by giving no opportunity to the members to raise their reservations. While speaking in the House, PPP Senator Raza Rabbani said that he felt he was not speaking in the Senate of Pakistan but in a “princely state” where “I am blindfolded, handcuffed and I parrot whatever the ministers say or whatever comes after being passed by the cabinet”. Rabbani said that he was wasting his time in the House while tearing up a copy of a bill in protest.

Copyright Business Recorder, 2023