Islamabad: South Korean companies in Pakistan are on the brink of operational shutdown, mainly because of the import restrictions and delay in the clearance of the containers stuck at the port, reported Dawn.

The non-opening of letters of credit (LCs) for imports of raw material is costing Korean companies "millions of dollars" in lost sales, said senior officials from the state-backed trade body as well as the local chamber of Korean investors.

According to Dawn, Pakistan's economy is facing a dollar shortage, which has resulted in official curbs on most kinds of imports. The USD 7 billion loan programme with the International Monetary Fund (IMF) is still in limbo, causing a depletion in the central bank's reserves that's now USD 3.19bn -- a level that's not sufficient to cover the national import bill of even 20 days.

"I am fighting with the bank every single day. Even for a small (outward) remittance of USD 20,000. Advance payments for imports are not being cleared. The situation is getting worse for the downstream industry as well," said Jin Han Chung, chairman of the Chamber of Korean Investors in Karachi.

As per the Pakistani newspaper, there are at least 25 major Korean companies that are operating in Pakistan in recent years.

According to Sung Jae Kim, director general at Kotra Karachi, the crisis became severe for Korean companies three months ago, and the situation has since worsened. This is despite the fact that the governor of the State Bank of Pakistan (SBP) directed banks in January to clear payments for containers stuck at the port.

"We request that the government should release all pending LCs opened by Korean companies and their partners while allowing them to open new LCs to continue operations," he said, adding that Islamabad should issue a "clear policy statement" in support of export-oriented foreign companies.

Kim said he understands the constraints faced by the government when it comes to allowing the dollar outflow, but restricting raw material imports is no solution. "International trade must go on. Commerce must continue," Dawn quoted Kim as saying.

Pakistan's imports from Korea in 2021 amounted to USD 1.5 billion, up 41.8 per cent from 2020, according to the International Trade Centre.