ISLAMABAD: United Towel Exporters which acquired a 70 percent stake in Dutch-based Vespo Groep BV expressed optimism its exports to Europe would jump up significantly.
In a meeting held in end-December last year, the Finance Division informed the cabinets Economic Coordination Committee United Towel exports would go up to $13.5 million in 2018, up 221 percent from the current $4.2 million.
It also sought permission from ECC to allow United Towel to remit $9.39 million for acquiring a 70 percent majority stake in Vespo Groep BV, reported Express Tribune.
ECC was apprised as a result of this acquisition over 40 percent profits would be repatriated back to Pakistan after two years and 60 percent would be invested back to fuel business growth. Payback period for this investment is 13.5 years, with an internal rate of return computated at 26.72 percent.
This equity investment would be financed via export proceeds kept in special foreign currency accounts of United Towels and per SBP rules textile exporters are permitted to keep 10pc of their export proceeds in foreign currency.
Finance Division also reminded that ECC in 2002 decided that SBP should give investment go-ahead for up to $5 million abroad, whereas investments more than $5 million would require the formers approval.
The central bank according to Finance Division was appraising the proposal and sought go-ahead for remitting $9.39 million on condition United Towels send all foreseeable foreign remittances from same account.
During the meeting, the privatization minister was off the view an evaluation should be undertaken for this proposed investment and its economic viability. The SBP in response said evaluation of this proposed investment had already been conducted and was found to be economically viable.
As per the National Food Secretary, this investment would be beneficial for the country as a Pakistani company would gain foothold in the European market and help it in expanding its operations besides repatriating valuable foreign exchange.