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KARACHI: A new policy designed to encourage startups and financial technology (fintech) companies will make it possible for Pakistanis to make direct investments in India, a market long inaccessible to them because of the troubled relationship between the two countries.

“The new policy for equity investment abroad will attract foreign direct investment through the establishment of holding companies by Pakistani fintechs and startups,” Pakistan’s central bank said. It added that the policy will make it possible for exporters to establish subsidiaries or branch offices outside Pakistan, and allow Pakistanis to acquire sweat equity, a non-monetary benefit.

While the policy opens up the possibility of investment in India, companies might still have to meet other requirements specific to India.

“In the case of India, it will have to look at what other rules and regulations dictate,” central bank spokesman Abid Qamar told Arab News on Friday. “It is not that you go and make investment … it may be you need permission.

“If there are any other India-specific rules and regulations, they will have to be met.”

Relations between the South Asian neighbors have been tense since the partition of British-ruled India into Muslim Pakistan and majority Hindu India in 1947. Two of the three subsequent wars between the two nations were fought over the disputed Kashmir region, which both nations claim in full but rule only in part.

The relationship has been particularly tense since August 2019, when India revoked the autonomy of the portion of Kashmir it controls and implemented curfews and communication blackouts. The diplomatic relations deteriorated further in recent months, as India and Pakistan each ordered half of the other’s diplomats to leave.

India granted most favored nation (MFN) status to Pakistan in 1996, which granted it non-discriminatory access to the Indian market. The move was never reciprocated. New Delhi withdrew Pakistan’s MFN status in 2019 after an attack in Indian-controlled Kashmir that nearly sparked a full-blown war.


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