Business

AMMAN — The Department of Statistics (DoS) announced on Wednesday that the inflation rate reached 3.2 per cent during the first seven months of this year.

The DoS attributed the rise to higher rents, besides an increase in the prices of clothes and shoes, tobacco, transport and education.

This rise was coupled with a decrease in the prices of meat and poultry, hygienic products, oil and fat as well as telecommunications, the DoS said in a statement received by The Jordan Times. 

AMMAN — The American Chamber of Commerce in Jordan (AmCham) held a seminar this week during which it  discussed American tax regulations for expatriates and businesses.

“Organised to inform expats and those with American business interests about new US tax policies, the event brought together experts from the US Embassy, Jordanian banks and business advisory firms,” the chamber said in a press statement received by The Jordan Times.

It added that the US ambassador and AmCham chairman familiarised attendees with the details of recent changes to American tax policy.

According to the statement, Adli Qandah, director general of the Association of Banks in Jordan, gave remarks on complying with the Foreign Account Tax Compliance Act (FATCA) from a banking perspective. He was joined by Fouad Kraishan and G.F. Joey Musmar, from Capital Consulting and Miller Musmar, business advisory firms specialising in tax, audit and accounting.

“The aim of this seminar was to provide American citizens and green card holders with the information to remain in compliance with US tax laws, and to take advantage of exclusions available for expats,” Kraishan said.

Presentations also included tax planning for foreign businesses and investors in the US, and tax planning for US business overseas.

BERLIN — Beset by low air fares and relentless competition, airlines around the world are waking up to the value of their frequent flyer programmes (FFPs) and realising they can boost profits as well as brand profile.

A multitude of global carriers, preserved by complex cross-border ownership rules that curb dealmaking, means that simply selling tickets is no longer lucrative. Industry body IATA predicts a 3.5 per cent drop in fares this year and for airlines' net profit margins to reach just 2.4 per cent.

As airlines dig around for new ways to make money, many of them are finding it buried deep in their marketing departments.

Dating back to American Airlines' launch of AAdvantage in 1981, FFPs were originally used to encourage a customer to spend their money with just one carrier by offering free flights as rewards once enough miles had been collected.

Nowadays, however, the programmes, with their rich customer data, have become a currency of their own as airlines realise their value to companies such as credit card providers, hire car companies and hotels. An example: Delta commanded $675 million from American Express for its Skymiles in 2011-2013, according to Euromonitor analyst Nadejda Popova.

Those are not the only kind of deals to which airlines have turned, increasingly inventive as profits nosedive. In 2012, Germany's ailing Air Berlin sold a 70 per cent stake in its Topbonus programme to Etihad for 185 million euros ($247.72 million), more than the market value of the German company as a whole at the time. In 2013, an initial public offering (IPO) for Smiles helped Brazil's Gol bring down net debt.

Now, industry watchers expect more such deals, spin-offs and stock market listings as airlines try to unlock more value from these businesses — and in turn drive more new revenues.

Brazil's Valor Economico newspaper recently reported that the country's third-largest airline Azul Linhas Aereas could follow in the steps of rivals TAM and GOL by floating its TudoAzul FFP as a way of raising funds in the capital market, citing the programme's director.

"The visibility you get from establishing it as a separate unit and the additional focus that it then has in terms of becoming profitable in its own right pushes it to generate revenue from sources other than the core FFP," Jonathan Wober, chief financial analyst at CAPA — Centre for Aviation, an independent aviation market analysis group.

Valuation

Given that airlines often don't report separate figures, it's hard to say precisely what FFPs are worth. But the figures that are available show how richly valued they are.

When Air Canada spun off 12.5 per cent of its FFP in 2005 it was valued at C$2 billion ($1.82 billion), or around 20 times its then annual profit of C$99 million. More recently, analysts have put a value of up to $2.5 billion on the loyalty division of Quantas — almost 10 times the unit's annual profit — as Qantas prepares to float or sell part of it under a restructuring.

There are benefits for those airlines that do make money too. Deutsche Lufthansa's new Chief Executive Carsten Spohr said last month that giving its FFP Miles & More an independent profile would lift the entire group's profitability and provide money needed for new planes.

Analysts at KPMG say it's worth an airline putting a programme into a separate unit first before attempting a stock market flotation.

"For IPOs there are a lot of requirements when it comes to transparency. I would recommend letting the programme report results for one or two years first so the market has access to numbers," Magnus Schenk, a transactions director at KPMG in Frankfurt, told Reuters.

Rich data

It's no surprise that investors are interested in FFPs for their data. What makes FFPs particularly sexy is the detail in that data: Not just a rich seam of customers, but a rich seam of rich customers.

"It's extremely powerful data, especially as it tends to be slanted towards the premium segment," said Marc Allsop, senior vice president and head of global business development at Aimia, which has stakes in a number of FFPs and runs other loyalty schemes including the Nectar supermarket plan in the UK and Italy.

Allsop indicated that in the UK, 41 per cent of those who are a member of an airline loyalty scheme have an annual income of above £90,000 ($151,164).

Still, he said, airlines face a tougher task than retailers when it comes to leveraging their data, because people fly far less often than they shop.

A way around this would be to keep tracking their customers once they leave the airport.

"Airlines sell tickets, tell people when they can check in, lead them on board and to their destination city. Then the next time passengers hear from them is when it's time to check in again," Stefan Auerbach, head of airline solutions at Lufthansa Systems, told an aviation conference in Frankfurt.

Instead, they could be using smartphone technology to track their customers as they travel onwards, gathering more information on their spending to tailor offers to their preferences, and increase the possibility that customers take them up, thus bringing in more revenue.

Costing new flyers

Aimia's research showed that while 73 per cent of consumers were part of supermarket loyalty schemes, just 12 per cent were members of airline schemes.

Carriers such as Lufthansa and Emirates hope to attract more flyers, and make infrequent customers more regular, by offering the option to buy miles — to reach reward thresholds — or by offering smaller items like songs via iTunes to persuade them to cash in their points.

More customers, more profits? Maybe. Amid the scramble to boost their FFPs, airlines also have to remember to manage the trillions of unused award miles out there to make sure they don't suddenly get swamped with requests that could burden their yields, or how much profit they get per seat.

For despite airlines offering customers the chance to buy anything from language classes to cases of wine with their points, most people still just want to use their points for a free flight or an upgrade.

"I would rather spend 160,000 miles for a Lufthansa business class ticket than to take the same miles for five nights at a middle range hotel somewhere," said Dennis Glosik, an airline blogger and frequent flyer with Lufthansa.

GAZA CITY — With thousands of homes reduced to rubble and its infrastructure in ruins, Gaza's reconstruction will cost billions and require at least an easing of Israel's blockade to allow in building materials.

Cement will be key among these materials, but its import will be controversial since it has been at the heart of an underground war between Israel and Hamas.

From Beit Lahiya in the north to Rafah in the south, Israel's latest offensive has left swathes of the Gaza Strip in ruins.

Families come during brief lulls in the fighting to sift through the debris of their homes for possessions, waiting to start rebuilding their lives.

In front of his apartment, reduced to a grey mass of dust, rubble and twisted iron, Jamal Abed drags on a cigarette as he thumbs his prayer beads.

"They destroyed everything here, there's nothing we can do," he says.

He knows he could spend months, even years, without somewhere to live because his home will have to be completely levelled before it can be rebuilt.

But for reconstruction to start, there has to be a negotiated end to the fighting.

There also has to be cement, lots of it, and the Palestinian enclave is suffering a chronic shortage of this crucial construction material.

Israel first imposed a blockade on Gaza in summer 2006. It was significantly tightened a year later after the Islamist movement Hamas seized control of the enclave, with Israel imposing severe restrictions on the entry of cement, gravel and steel.

Israel said the restrictions were aimed at stopping militants from building bunkers and other fortifications.

'100 years to rebuild' 

James Rawley, the UN's resident and humanitarian coordinator has warned that failure to lift the blockade could cause more conflict in Gaza in the future.

If the measures are not removed, "not only will we see very little in the way of reconstruction, but I am afraid that the conditions are in place for us to have another round of violence like we're seeing now," he told AFP on Sunday.

In 2010, Israel eased restrictions on imports of food and construction materials after international outrage over a botched Israeli raid on a Gaza-bound flotilla trying to break the blockade left 10 Turkish activists dead.

Since Hamas took power in 2007, Israel has launched two major offensives on Gaza. Both caused widespread devastation to the battered enclave.

Gazans have been largely able to circumvent the restrictions of the blockade by importing cement through cross-border smuggling tunnels from Egypt.

But after the Egyptian military overthrew Hamas' Islamist ally, president Mohammed Morsi, in July 2013, the new regime of Abdul Fatteh Al Sisi has cracked down on the tunnels, destroying over 1,600 of them and dealing a death blow to the smuggling industry.

Since then, Gaza's reconstruction has been dependent on the materials Israel has allowed in, with supplies only permitted for international construction projects.

"It would take 100 years to rebuild Gaza with the current rate of construction material being allowed in," said Sari Bashi, co-founder of Israeli NGO Gisha which campaigns for Palestinian freedom of movement and trade.

"In the years in which cement has been banned from entering Gaza, Israel did not manage to prevent tunnels from being dug," she said. "It is a policy that is overwhelmingly harming civilians in Gaza with little to no security benefit for Israel".

Cementing the truce? 

The UN estimates more than 11,800 homes have been destroyed or rendered uninhabitable, more than twice the number that were destroyed in a previous attack.

At the time, the international community pledged $4.5 billion (3.4 billion euros) to rebuild Gaza's shattered infrastructure.

This time round, the Palestinians say they need up to $6 billion to fix hospitals, roads, schools, water facilities and factories hit by shelling and bombing.

Mahir Al Tabaa, head of Gaza's chamber of industry and commerce, says that "more than 350 industrial buildings" have been destroyed in the fighting, including 50 key factories.

The issue of cement is set to be one of the key challenges for the two sides as they struggle to reach an agreement.

Israeli officials have recognised the importance of rebuilding Gaza but they do not want to lift the blockade — the main demand of the Palestinians.

"There will be no agreement without the blockade being lifted, without cement entering Gaza," said Daifallah Al Akhras, a senior Palestinian official. "How do you expect us to rebuild without cement?"

AMMAN — Exports from East Amman Industrial Zone dropped by less than 2 per cent during the first seven months of 2014 compared to the same period of last year, affected by the regional political developments. Society of East Amman Industrial Investors Chairman Iyad Abu Haltam on Monday said the zone’s exports reached JD214 million compared to JD218 million during the same comparison period. He noted that exports to Iraq, despite the deteriorated security situation there, increased by 7 per cent growing to JD98 million compared to JD92 in the same comparison period. Chemical industries and cosmetics topped the zone’s export list at JD45 million, followed by engineering, electricity and information technology sector at JD44 million, while the supply, food, agricultural and animal products came third at JD41 million. 

AMMAN — Jordan Enterprise Development Corporation (JEDCO) will support the "Made in Jordan” campaign and an exhibition for the Jordanian products under two agreements signed Monday with Amman Chamber of Commerce. The accords, all financed by the European Union, amount to 63,000 euros, according to a JEDCO statement sent to The Jordan Times. During the signing ceremony, JEDCO Chief Executive Officer Yaroub Qudah highlighted the importance of the agreements in boosting Jordanian products, citing the campaign's significance in enhancing the Kingdom's economy. Qudah also said that the industrial sector has witnessed a considerable growth during the past 10 years, registering by the end of 2013 a 13.2 per cent rise in industrial production. Head of the campaign, Musa Saket, said the second phase of the campaign will target school students to enhance their awareness of the high quality of the Jordanian products, and their contribution to bolstering the national economy and creating job opportunities, the statement said. 

GAZA CITY, Palestinian Territories — Israeli bombardment has left parts of Gaza in ruins and the enclave's already shattered economy is also feeling the pinch as prices for staple foods have started to climb.

The market in Gaza City's Shati refugee camp was bustling this week, but many of the camp's hard-up residents are buying less.

Israel's offensive on the enclave has hit agricultural areas badly, pushing up prices.

Khaled Ighrad, 48, who was buying food with his wife and one of his six children, has had to cut back on some key items for his family.

The price of eggs has doubled from 10 shekels (two euros, $3) to 20 since Israel launched a campaign of air strikes on July 8.

"I'm not buying a whole box of eggs, I'm buying half. I'll buy this and it lasts us for two days," he said, wistfully looking at the trays of eggs on the stall in front of him.

"Prices have gone up because things like meat and eggs are produced on the border area. We don't go to the border area any more, so the people only went during the ceasefire," he added.

Israel expanded its offensive against Hamas into a ground operation in mid-July, pushing troops, tanks and artillery across the border into the narrow enclave.

Grown in Gaza       

A few stalls away, under a coloured canvas awning, Abu Ahmed Badawi sits next to tables stacked with peppers, onions, tomatoes and potatoes. Few people stop to ask about his wares, grown in Gaza, since he has had to raise his prices.

Not only are farmers unwilling to tend their crops because of the risk of air strikes or shelling, or Hamas rocket attacks falling short, but drivers are wary of travelling to these areas to bring them to the city's markets.

"If they go, they're worried, they're taking their life in their hands, they might die — or they might live. So the price of goods has increased. Not only because of the sellers, but the people who transport their goods," he indicated.

Before the conflict, he sold a kilogramme of potatoes or tomatoes for one shekel. This has climbed to three shekels, a further pinch for Gazans whose economy has been strangled by seven years of Israeli blockade.

"It is difficult to people because they don't have money or work and there's no economy," Badawi said angrily. The fruits on his stall have not changed in price — he said they were imported from Israel at the Kerem Shalom crossing.

"This is the Israelis' strategy — they strike us, then they open the border" to let their produce in, he said bitterly.

50 factories razed

Mahir Al Tabaa, head of the Gaza chamber of commerce and industry, agreed the conflict had caused "huge and long term indirect losses" for the economy.

"The direct losses when [Israel] destroyed the economic and industrial establishments, and residential buildings is around $3 billion," he told AFP.

He said while the price of petrol, which is also imported from Israel and the price of which is controlled by the government, has not changed in the conflict, "the prices of all goods and agricultural produce like vegetables and meat will significantly increase”.

"This is a heavy burden," he remarked.

In addition to this, the destruction of "350 industrial sites, including more than 50 large, strategic factories" would set unemployment climbing.

The "unemployment level will be around 50 per cent after the war, an average of 200,000 people out of work... the level was 41 per cent before the conflict," he indicated.

One sector still doing a lively trade is tobacco.

In the market at Shati, Abu Salim sits by his small stall, where he sells cigarettes.

Although his prices have increased, he is doing brisk business and shoppers constantly stop by to pick up a pack of Royals, the brand favoured by many Gazans.

A packet of 20 Royals costs eight shekels, one more than before July 8, although Abu Salim has seen no decline in demand.

"In the truce, people smoked a pack a day," he said, referring to the three-day ceasefire that ended on Friday. "After it ended, they smoked two a day, because of the situation in the country." 

AMMAN — International General Insurance Holdings (IGIH) announced Sunday in a press statement that the group’s net earnings amounted to $18.5 million during the first half (H1) of this year compared to $21.3 million for the same period in 2013.  Wasef Jabsheh, vice chairman and chief executive officer of IGIH, said in the press statement: “Although we were unable to surpass last year’s profit for the first half, our results were in line with our projections given the soft market the industry is facing.” He added: “Attaining a combined ratio of 87.64 per cent in the current environment continues to prove that IGIH remains focused on writing profitable business whilst firmly managing risk and expenses.  We will continue to adhere to our philosophy of writing for profit rather than volume in the current environment.” 

SYDNEY — Australia's central bank Friday cut its growth forecasts as it reinforced a "period of stability" in interest rates and highlighted the challenges the economy faces as it moves away from mining-led expansion.

The Reserve Bank of Australia (RBA) lowered its gross domestic product (GDP)  forecasts for 2014 and 2015 by 25 percentage points, and said the "key uncertainties" facing the economy included when and how large the fall-off in resources investment would be.

"The key uncertainties for the domestic economy continue to be centred on the timing and extent of the decline in mining investment and how this is balanced by the expansion of resource exports and the recovery in non-mining activity," the RBA said.

"Mining investment could decline more sharply than anticipated. On the other hand, it is possible that consumption and non-mining business investment could, in time, be stronger than expected," it added.

In its quarterly Statement on Monetary Policy, the central bank projected economic growth to be about 2.5 per cent in the year to December 2014, down from 2.75 per cent forecast in May.

It estimated GDP to be about 2 to 3 per cent in the year to June 2015, from the prior forecast of 2.25 to 3.25 per cent.

Near-term inflation expectations were revised lower after the government repealed carbon tax legislation. Consumer prices were tipped to rise by 2 per cent instead of by 2.75 per cent in the year to December 2014.

The Australian dollar slipped by almost a quarter of a cent to about 92.45 US cents after the statement was released.

The updated growth forecasts came a day after official figures showed Australia's unemployment rate spiked to a 12-year high of 6.4 per cent in July, from 6 per cent in June.

The surprise jump in the jobless rate strengthened expectations that a near-time hike in interest rates was less likely amid continued signs of weakness in the economy.

The RBA kept the cash rate on hold at a record low of 2.5 per cent on Tuesday. Interest rates have remained at 2.5 per cent since the central bank last eased monetary policy in August 2013 to boost growth in non-mining activity as the economy exits from an unprecedented resources investment boom.

The reserve bank said Friday that "the recent softness in some indicators has increased the uncertainty around the strength and timing of the pick-up in consumption and non-mining investment".

"With only tentative signs of improvement in near-term indicators, the timing of the pick-up has been pushed out a bit further," it added.

AMMAN — Advancement in technology and means of transportation should be exploited to achieve Arab economic integration and enhance the efficiency of inter-Arab trade, experts told a conference on Sunday. 

Dubbed "The Cost of Inter-Arab Trade Conference", participants also proposed that Arab countries alter regulations on trade and commerce to facilitate the transportation of goods and capitals across the region's borders.   

Held at the Talal Abu-Ghazaleh Forum, in cooperation with the Economic Policy Development Forum (EPDF) and the League of Arab States (LAS), the conference was based on a study conducted by experts at Talal Abu-Ghazaleh Consulting. 

LAS Economic and Social Council Assistant Secretary General Mohammad Tuwaijri, told the opening session that the council was able to reduce customs tariffs in 2005 and create a legal base for a modern trade system that corresponds with that of the World Trade Organisation (WTO).

"The Economic and Social Council cancelled previous bilateral trade agreements between Arab countries and created a collective agreement that binds all league members instead," he said, noting that the agreement takes into consideration the particularity of each country when it comes to economic advancement and financial abilities.

"The council aims to boost the quality and competitiveness of products," he added, stressing the importance of partnership with the private sector besides the diversification of products and markets.

Tuwaijri emphasised the need to increase inter-Arab trade from the current level of 10 per cent to over 50 per cent.

Industry and Trade Minister Hatem Halawani said the region's potentials must be utilised to better serve the Arab nation. 

"The Arab world, which represents 10 per cent of the world's area, is rich in natural and human resources," he said, indicating that the Arab population exceeds 350 million, and the workforce comprises 112 million individuals approximately.

"The Arab world possesses over 59 per cent of the world's proven oil reserves, and 29 per cent of the world's proven gas reserves," he added.    

Halawani called for creating an Arab common market that guarantees free movement of labourers, capital and means of production, stressing the need for a fiscal union that would involve monetary policies and currencies between Arab countries.

The minister attributed the weakness of inter-Arab trade to the region's political developments, in addition to delays in implementing trade agreements and decisions.

He highlighted Jordan’s success in improving economic indices. 

"The Kingdom's economic reform strategy, which started five years ago, registered a positive economic growth that helped Jordan overcome an economically critical stage," he said.   

The government's reserves reached $14 billion by the end of May this year after they stood at $6 billion in 2012, according to Halawani, who added that the Kingdom registered in 2013 real growth in gross domestic product that reached JD24 billion, compared to JD22 billion in 2012.

EPDF Chairman Talal Abu Ghazaleh described the conference as an achievement resulting from cooperation with the LAS, noting that others are to unfold in the future.

He said that efforts to include the league in the WTO as an observing member are still under way.

"Our partnership with LAS will create an Arab coalition for trading services, since trading should not be exclusive to goods," he told the audience, noting that the coalition is to be located in Lebanon.

Based on a suggestion from the league, the EPDF is to advise economic administrative bodies in Palestine, Sudan and Yemen to help these countries develop economically.

"We are working together on a project for the accreditation of the Arabic language as an official language for the WTO," he concluded.