PEC Approves Changes in Controversial Clause of Foreign Firms Registration

The governing body of the Pakistan Engineering Council (PEC) has made it compulsory for foreign firms to enter into joint ventures with local firms before participating in the bidding. According to the PEC, foreign firms will now have to enter into joint ventures with local firms at a 70-30 ratio (70 percent foreign firm and 30 percent local firm) before negotiating for any project in Pakistan.

The foreign consultants will now have to get registered for that specific project, by fulfilling the conditions set out in clause (2) of by-law 6 of the PEC Act. It has also been made compulsory for foreigners to ensure technology transfer to the local firms.

According to PEC, an enterprise fully owned by one or more foreign nationals having 51 percent shares or any enterprise incorporated with the Securities and Exchange Commission of Pakistan and having 51 percent shares with 70 percent of its engineering staff from Pakistan is considered as a foreign firm. A foreign constructor or operator will be eligible to work with a Pakistani constructor or operator, even if specialized technology is also available in Pakistan.

During the last regime, instead of issuing a “project-specific license”, PEC decided to issue a yearly basis license that could be renewed after expiry. But for getting a project of unlimited cost PEC reduced the joint venture proportion, after which local companies faced huge losses during the past two years. In this regard, PEC governing body has approved changes in clause (2) of by-law 6 of the PEC Act. Now, it has been made compulsory that while entering into joint ventures local companies should have a minimum 30 percent ratio whereas foreign companies may have up to 70 percent of the ratio.

During 2017-18, PEC awarded more than two dozen licenses to foreign companies and other contractors. These companies were awarded projects worth billions of rupees while ignoring mandatory conditions of issuing project-specific licenses and joint ventures with Pakistani companies. The matter was also taken up by the Public Accounts Committee (PAC) which directed PEC to review the decision over reservations of local companies.