Business

AMMAN – A group of US infrastructure companies are in Jordan to explore investment opportunities, particularly in the field of renewable energy. 

Kenneth Hyatt, deputy undersecretary for international trade, is leading the infrastructure business development mission to Jordan and is accompanied by top executives of US firms working in the sectors of renewable energy, water and construction. 

At a meeting with the press on Wednesday, the US official, who also oversees the daily operations of the International Trade Administration, said the focus of the visit, that also took them to Egypt and Morocco, was renewable energy, indicating that six out of the 10 companies in the delegation operate in the solar power. 

"We chose these three countries because of their potential," he said, indicating that Jordan and the US enjoy strong economic and commercial ties. 

Jordan was the first Arab country to sign a free trade agreement (FTA) with the US, Hyatt said, noting that before the FTA was signed, trade exchange was only around $400 million but currently it exceeds $3.3 billion. 

In 2013, Jordanian exports to the US reached $1.2 billion, while this year  it is expected to go up even higher as  the value of exports  in the first nine months of this year exceeded this figure, the official indicated. 

He noted that the delegates held meetings with government officials in Amman, in addition to business to business meetings with the private sector. 

"Energy is very important to Jordan and renewable energy is a solution," he said, adding that the mission also seeks to encourage Jordanian businesspeople to invest in the US. 

Hyatt selected the sectors of ICT, healthcare and energy as important businesses that can contribute to boosting trade between Jordan and the US. 

Attending the meeting with the press was Ahmad Nada, vice chairman and regional director of First Solar, which is a global provider of comprehensive photovoltaic (PV) solar systems. 

Nada said the company is currently taking part in the Shams Maan Power Plant as it provides engineering, procurement and construction to the 52.5 megawatt solar-run power plant in the southern governorate. 

He added that First Solar is going to bid for a similar project in the governorate of Mafraq, noting that bidding would open on January 20 of next year. 

"We see valuable economic benefits in investing in Jordan," Nada said. 

GENEVA — A century after the birth of commercial flight, the industry is a vital driver of the global economy, International Air Transport Association (IATA) Director General/Chief Executive Officer (CEO) Tony Tyler said on Wednesday at the “global media day", with focus on safety.

About 1 per cent of global gross domestic product (GDP) is spent on air travel. Including direct taxation, that will bring the total spending to about $823 billion next year. 

This expectation is based on the anticipation that 3.5 billion people will travel and 53.5 million tonnes of cargo, worth some $7.3 trillion, will be transported by air.

The global air industry is expected to report a collective net profit of $25 billion in 2015, up from $19.9 billion this year, but there will be clear differences in profitability among regions.

Over half of the profits, about $13.2 billion, are expected to be generated by airlines in North America. The European industry, by contrast, although similarly sized, is expected to make only $4 billion.

Middle East airlines have one of the lowest breakeven load factors: 58.6 per cent. While average yields in the region are low, unit costs are even lower, partly driven by the strength of capacity growth, said Tyler.

Passenger capacity in the region is expected to expand by 15.6 per cent in 2015, up from 11.4 per cent in 2014, and post-tax net profits are expected to grow to $1.6 billion in 2015, up from $1.1 billion in 2014.

This represents a profit of $7.98 per passenger and a net profit margin of 2.5 per cent, according to IATA.

Given the risks in the world today, economic uncertainty, political instability, public health emergencies and terrorism, among others, the $25 billion profit forecast “is not much of a buffer to absorb a significant change for the worst in the operating environment”, Tyler said.

As such, IATA’s “top priority” and an area that needs to be modernised is safety and security, the IATA head noted.

”Unless we find a better way to screen passengers, we will never be able to cope with the rising demand,” said Tyler, adding that the project “is moving forward, as well as other new initiatives in areas such as cyber security”.

The aircraft tracking task force (ATTF) was established by IATA after the disappearance of Malaysian Airlines Flight 370 on March 8, 2014. The ATTF’s mandate is to assess what can be done to improve global aircraft tracking capabilities. After evaluating the state of aircraft tracking and conducting an assessment of available and planned aircraft tracking products, services and practices, the ATTF found that “there is a range of existing technologies and services, many already installed on aircraft, which can be used to enhance worldwide aircraft tracking in the near term”.

It also established that existing procedures need to be amended and new or improved communications protocols between airlines and air navigation service providers have to be developed.

Safety statistics are still good, said Captain Kevin L. Hiatt, chairman of the ATTF and senior vice president of IATA, who acknowledged that “commercial aviation is not sustainable if the public does not have confidence in the safety of the system” and that “public trust and confidence in aviation is at risk when large and modern aircraft cannot be located”, an issue that his team “has attempted to consider” before issuing a report and recommendations that “will serve to improve the collective ability to identify and track aircraft globally, significantly reducing the remote probability of such an occurrence”.

The MH370 and MH17 tragedies have made airlines “take the tracking issue very seriously”, said Tyler, adding that "the industry is working to improve, but some issues such as tamper proofing will take time to address and implement”.

Challenges facing the industry could be easier overcome through partnerships with governments, which are critical, said Tyler, adding that while “some very enlightened governments understand the strategic value of aviation connectivity”, others, like in Europe, impose “heavy taxation and onerous regulation [which] are among the root causes of the struggles that European airlines are experiencing”.

IATA, said Tyler, is “asking governments to regulate airport monopolies with a firmer hand than currently exists in most markets” and also “calling for rigorous economic regulation to ensure that there is an incentive to deliver cost-efficient infrastructure... at agreed services levels”.

In its 100 years of history, the air travel industry has evolved in many ways, often leading the development of global systems.

“We had global reservation and telecommunication systems well in advance of the Internet, simply because, to a greater extent than most other industries, we were ahead of the curve in developing networks that spanned the globe,” said Tyler.

The Internet has changed the way industries do business, aviation included, and IATA “is taking the lead in helping the industry in several areas”.
Regarding cargo, “infamous for its paper-laden processes”, eliminating the paper trail that accompanies every air cargo shipment is a “critical development that must happen” if the process is to get modernised, said the IATA CEO.

The distribution process, when it comes to passengers, “also needs some shaking up”.

Airlines sell a growing array of product customisations and innovations using Internet technology, but “moving this innovation into the distribution processes for travel agents is a challenge”.

IATA’s “new distribution capability” programme aims to make it easy for airlines to distribute their full range through travel agencies.

PARIS — The gap between the rich and poor in a range of countries has reached its widest in 30 years and the trend has harmed growth, the Organisation for Economic Cooperation and Development (OECD) said Tuesday.

In a new report, the OECD noted that most of its 34 member countries had seen a growing widening in the inequality gap.

"In most OECD countries, the gap between rich and poor is at its highest level since 30 years," the report said.

"Today, the richest 10 per cent of the population in the OECD area earn 9.5 times the income of the poorest 10 per cent; in the 1980s this ratio stood at 7:1 and has been rising continuously ever since," it indicated

The OECD counts both developed and developing countries as members, including nations from the European Union (EU) as well as the United States, Turkey, Mexico and Japan. China, Brazil and India are not members.

In the couple of decades leading up to the global economic crisis, average household income grew for all OECD countries by about 1.6 per cent annually.

"However, in three quarters of OECD countries, household incomes of the top 10 per cent grew faster than those of the poorest 10 per cent, resulting in widening income inequality," the report said.

During the recent post-crisis years, average household income stagnated or fell in most member countries, it added.

The gap between the rich and poor varies widely across OECD member states and is often narrower in many Continental European nations and the Nordic countries, according to the report.

But the average income ratio between the richest 10 per cent and the poorest 10 per cent skyrockets in other member states.

It "reaches around 10 to 1 in Italy, Japan, Korea, Portugal and the United Kingdom, between 13 and 16 to 1 in Greece, Israel, Turkey and the United States, and between 27 and 30 to 1 in Mexico and Chile".

The report argues that expanding income inequality has negatively affected the economies of member countries, estimating that it has knocked more than 10 percentage points off growth in Mexico and New Zealand.

"In the United States, the United Kingdom, Sweden, Finland and Norway, the growth rate would have been more than one fifth higher had income disparities not widened," it said.

At the same time, according to the OECD's calculations, greater equality helped boost gross domestic product per capita in Spain, France and Ireland prior to the economic crisis.

The report called for anti-poverty programmes along with increased access to high-quality education, training and healthcare.

"The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented," the OECD said in a statement announcing the report.

AMMAN — The Central Bank of Jordan (CBJ) on Tuesday decided to expand its medium-range lending programme to licensed banks for re-lending at competitive interest rates to the agricultural sector. The programme already supports industrial, tourist and renewable energy sectors. The CBJ, in a statement issued on Tuesday, said this procedure aims at supporting economic sector in a way that contributes to economic growth due to the importance of farming in the comprehensive development strategy and in response to the sector’s demand. The CBJ indicated that a total of JD900 million can be disbursed under the programme as the maximum amount that could be extended by each bank is based on 5 per cent of its total direct facilities in Jordanian dinars. This procedure is a continuation of the Agricultural Credit Corporation’s programme in presenting funds to farmers, which is partially financed by CBJ’s loans to the corporation at low interest rates. 

NEW YORK — World oil prices slid another 4 per cent to new five-year lows on Monday, as expectations of a deeper slump next year and a prediction by a core member of the Organisation of Petroleum Exporting Countries (OPEC) that crude will remain at $65 for several months triggered another round of selling.

The chief executive of Kuwait's national oil company said oil prices were likely to remain around $65 a barrel for the next six to seven months, the latest indication that Gulf producers were content to ride out the latest rout.

The pessimistic outlook deepened the decline in a market that many traders now see as having little chance of rebounding.

"When these things go lower, they tend to go much farther than people anticipated," indicated Tariq Zahir at Tyche Capital. "I definitely think we're going to keep heading lower, everyone is trying to pick a bottom."

Brent for January fell by $2.95 to $66.09 a barrel by 1749 GMT, its lowest since October 2009.

US crude was down $2.66 at $63.18 a barrel, its lowest since July 2009.

Late on Friday, Morgan Stanley set a new bar for bearishness on Wall Street, slashing its average 2015 Brent base-case outlook by $28 to $70 per barrel and warning that prices could drop as low as $43 a barrel next year.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analyst Adam Longson said.

Thus far, there appears little sign of intervention, even after oil prices dropped 15 per cent, or nearly $12 a barrel, since OPEC opted not to cut production at its November 27 meeting.

Top exporter Saudi Arabia has resisted calls from poorer members to curb output and shore up prices which have slumped more than 40 per cent since June.

Libya's state oil company said on Sunday the country was producing 800,000 barrels a day, though its El Sharara oilfield was closed due to a pipeline blockade.

It is unclear how soon the price slump will slow the US shale boom. While the number of onshore rigs drilling for crude oil remains relatively high, companies are making deeper cuts to spending for next year. 

AMMAN — The government is still studying the possibility of floating auto insurance premiums as insurers struggle with financial losses they blame on "low" fixed prices of compulsory third party liability (TPL). 

A source at the Ministry of Industry and Trade, who preferred to be unnamed, told The Jordan Times on Monday that the ministry will "soon" decide on whether to float prices or keep them fixed.  

The Jordan Insurance Federation (JIF) wants TPL prices linked to inflation rate, a step that is expected to increase TPL prices by 20 per cent, JIF President Othman Bdeir told The Jordan Times. 

The federation has been demanding liberalisation of prices for over three years and it reached an agreement with the government on full liberalisation of the insurance service in 2013, a decision that was supposed to go into effect in 2014, but it did not.

Bdeir said the current fixed price of JD93 has remained unchanged for the past seven years, noting that insurance companies get JD75 of the amount after the deduction of taxations and tariffs.

Insurance compensations have increased due to higher prices of cars' spare parts, according to Bdeir, who also mentioned a rise in the number of staff employed by insurance firms besides higher salaries.

Over the past two years, three insurance firms have quit the market and other three have stopped offering car insurance services due to continuous losses, he said, expecting more companies to follow the same steps if TPL prices do not increase.

"When insurance firms quit the market, they do not pay compensations for their clients, an issue the federation cannot solve," he said on Monday, adding that insurance firms lose around JD10 million annually due to TPL insurance. 

An open market for insurance services will encourage competition and will, on the other hand, limit the "very large" number of insurance companies in Jordan, which now stands at 21, and improve their services.

AMMAN — Capital Bank announced in a press statement on Sunday that in collaboration with the International Monetary Fund (IMF) and the International Finance Corporation (IFC), it organised a roundtable discussion entitled “Future Prospects and Investment Opportunities in the Middle East”. According to the press statement, Ghazi Shbeikat, IMF regional representative in Jordan and Iraq, and Ahmed Ali Atiqa,  IFC regional representative in Jordan and Iraq, attended the discussion besides Ayman Abu Dheim, deputy chairman of the National Bank of Iraq (NBI), and the Iraqi ambassador in Amman. A number of Jordanian and Iraqi businessmen and individuals with a stake in the Jordanian and Iraqi markets attended the discussion. Capital Bank Chairman Basem Khalil Al Salem said the bank has enjoyed an exceptional investment experience in the Middle East, and specifically in the Iraqi market, by virtue of the relationship with  NBI.

AMMAN — Jordan Investment Commission (JIC) President Montaser Okla on Sunday received Italian Ambassador Patrizio Fondi and discussed ways to enhance bilateral cooperation, especially in investment and economic fields. Okla said JIC is currently preparing to represent the Kingdom in the 2015 Milan Exhibition, scheduled to start in May next year, due to its importance. He added that Jordan will participate in a 125-square-metre pavilion in the exhibition that attracts more than 20 million visitors. Fondi commended the bilateral Jordanian-Italian relations, expressing his country’s keenness to develop them to serve the interests of both countries. 

AMMAN — Jordan will soon start discussions with Kenya, Tanzania and Ethiopia to sign free trade agreements with the three East African nations, Industry and Trade Minister Hatem Halawani said Sunday. 

The minister told an African economic delegation, currently visiting the Kingdom, that he contacted his counterparts in those countries in this regard. 

He said Jordan’s drive to develop economic ties with Africa was part of an economic openness policy that the Kingdom has been applying for years, besides commercial partnership based on trade liberalisation through signing several free trade agreements on the bilateral and multilateral levels.

According to a ministry statement sent to The Jordan Times, the minister valued these agreements that positively affected the economy, since the volume of national exports reached JD3.9 billion during the first eight months of 2014, 7 per cent higher than the same period of 2013.

Halawani said the trade volume between Jordan and East African countries reached $102.5 million in the first nine months of 2014 compared to $28.4 in the same period of 2013, according to the statement. 

Expressing the government's keenness to develop economic cooperation with East African countries in all fields, especially the commercial one, and to provide all that is needed to establish ties that serve the interests of both sides, Halawani added that the collaboration will be achieved through both the public and private sectors. 

Halawani underlined the importance of persuading businessmen to benefit from available opportunities, establishing investment projects and encouraging trade and expertise exchange. 

He acquainted the delegation with the reforms the Kingdom has been implementing, such as formulating economic legislations, issuing a new investment law, establishing developmental areas and providing an investment-attracting environment in order to diversify business opportunities.

Jordan Chamber of Industry President Ayman Hatahet expressed the private sector’s readiness to enhance economic relations between the Kingdom and African countries. 

Jordan Investment Commission President Montaser Okla said the Kingdom enjoys a promising investment environment, with a lot of available characteristics in various fields, stressing the commission’s readiness to provide all needed support to investors in the Kingdom. 

Zarqa Chamber of Industry President Thabet Wer said the meeting will produce important results that would enhance economic relations between Jordan and these countries.

For their part, members of the delegation, representing Tanzania and Ethiopia, expressed their willingness to develop economic cooperation with the Kingdom in various fields, in addition to benefiting from the opportunities available in Jordan.

They also said Jordan is characterised by its attractive investment environment compared to other countries in the region, referring to the positive results the Kingdom has achieved despite the challenges it is facing locally and regionally. 

DUBAI — Standard and Poor's (S&P) has lowered the outlook for the world's top oil exporter Saudi Arabia to stable from positive and its Gulf partner Oman to negative on sliding oil prices.

However, the ratings agency affirmed the strong "AA-/A-1+" long- and short-term foreign and local currency sovereign credit ratings for Riyadh over the "strong external and fiscal positions" it has built up in the past decade when oil prices were too high.

"We base our outlook revision on our view that, although real economic growth remains relatively strong, we think Saudi Arabia is unlikely to achieve sufficient levels of nominal income to raise the ratings over the next two years," S&P said.

It added that low oil prices will place pressure on the kingdom's gross domestic product (GDP) and per capita income which was reduced for the 2014-2017 period to $23,400 from $25,600 in June.

"We view Saudi Arabia's economy as undiversified and vulnerable to a sharp and sustained decline in the oil price, notwithstanding government policy to encourage non-oil private sector growth," S&P indicated late Friday.

Although Riyadh built fiscal reserves of around $750 billion from surpluses from high oil revenues, its public spending rose to record highs that raised the breakeven price for oil to between $85 and $93 a barrel.

Saudi Arabia pumps around 9.7 million barrels per day.

According to S&P, the hydrocarbons sector contributes about 45 per cent of GDP.

The agency said the stable outlook reflects that Saudi Arabia will keep its very strong fiscal balance sheet and net external asset position, while monetary policy flexibility remains limited and dependence on hydrocarbons stays high.

For Oman, which is not a member of the Organisation of Petroleum Exporting Countries (OPEC), S&P said the negative outlook was based on the view that the deterioration in the fiscal or external positions could be sharper than currently expected because of the steeper fall in oil prices.

S&P also affirmed Oman's satisfactory "A/A-1" long- and short-term sovereign ratings on "strong net external and general government asset positions".

"The ratings are constrained by our view that the quality of Oman's public institutions and governance is moderate, that high fiscal, external and economic dependence on volatile hydrocarbons receipts will persist, and that monetary policy flexibility is limited by the [US dollar] pegged exchange rate," it said.

Oil prices have lost more than a third of their value since June over a glut in output, weak demand and a strong dollar.