Business

ZARQA — Industrial exports from Zarqa and Mafraq governorates rose by 10 per cent in the first seven months of 2014, reaching $394 million, compared to the same period in 2013, Zarqa Chamber of Industry (ZCI) President Haidar Amaireh announced on Saturday. During the same period, the chamber issued 7,913 certificates of origin, he said, noting that exports of ZCI members amounted to $75 million in July, 2 per cent less than the same period of last year. Leather products and embroideries came first with $266 million achieving an increase of 10 per cent during the same comparison period. Supply, food, agricultural and animal industries came second at $66 million, 11 per cent lower than the same period of last year. Third place was achieved by plastic and rubber industries with $46 million, an increase of 7 per cent.

AMMAN — Amman Chamber of Commerce’s (ACC) statistics on Saturday showed that the trade sector’s contribution to the gross domestic product was 43.5 per cent in 2013. Transportation, telecommunication and storing topped the list at 12 per cent, followed by real estate and construction at 11.9 per cent. Transportation services and insurance came in third place at 10.1 per cent. Wholesale and retail trade stood at 8.1 per cent, while the contribution of restaurants and hotels was 1.4 per cent. Banks provided JD3.9 billion in credit facilities to the general trade sector in 2013, accounting for 20.7 per cent of the overall facilities that reached JD18.9 billion. The data showed that Jordan’s foreign trade volume developed remarkably in 2013, reaching JD21.1 billion, compared to JD6.208 billion in 2003. The general tax on sales gained from the trade and service sector reached JD1.9 billion, 76.5 per cent of the overall general tax on sales revenues in 2013. Sales tax on imported goods reached JD1.025 billion, on services JD436 million and on trade JD476 million. 

AMMAN — Jordan cannot continue its policy of subsidies that benefit the rich more than the poor, a senior International Monetary Fund  (IMF) official  told the Jordan News Agency in  telephone interview on Saturday.

"The government should reduce allocations of subsidies and reform those related to energy so as to ease pressure on government finances,” Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said. 

“Money saved via the subsidy reform can be used to increase investments to achieve growth," he added. 

According to Ahmed, future generations of Jordanians will have to shoulder the burden of indebtedness arising from the budget deficit as a result of government subsidies, especially in the area of energy. 

Noting that spending on subsidies reduces chances for setting up development projects and infrastructure, he indicated that some money saved, by amending the subsidies’ mechanisms and channelling them away from the rich, can be used to create work opportunities sought by young Arab people who aspire to find jobs.

The IMF official advised the government to be "very careful" when reducing subsidies and stressed the importance of having the proper methods in place to protect the poor. 

"This process should be gradual as one cannot change a 30- year-old policy in three months. The process should be a step at a time," Ahmed said. 

He urged that a strong awareness campaign should accompany the  subsidy reform process to acquaint the masses with the reasons behind such decisions and to rally public support for the drive .

“If you do not explain to the people what you are trying to do and why, then it would be difficult for the public to accept the reform requirements, particularly in light of the situation in the region,” the IMF official cautioned.

Ahmed noted that the Kingdom had suffered from two external "traumas"; the first caused by the Syrian crisis and the influx of more than one million Syrian refugees and the second resulted from the cut in the Egyptian gas supply, which prompted the country to buy fuel derivatives at high costs to generate electricity.  

However, the IMF official said the government had realised the tough price of these "traumas" and the need to reduce expenses and amend the budget, a situation he said each country can do on its own without the fund's help. 

Ahmed added that measures to alleviate the impact of the situation can be implemented in cooperation with the IMF in order to benefit from its technical expertise in this area coupled with  financial aid. 

He indicated that the "coming step in Jordan will be stabilising the economy in the face of the difficult external traumas and then we will see what could be done to increase growth rates". 

Regarding the impact of the situation in  Iraq on Jordan's mega-projects, especially the oil pipeline the two countries have agreed to implement, Ahmed described the current events in Iraq as "tragic" that will surely affect the Jordanian economy. 

He said Iraq is one of the most important exporting markets for the Kingdom and the situation now will negatively affect trade and investors' trust in the region. 

Yet, the official stressed the IMF's commitment to continue helping Jordan next year to deal with challenges brought by neighbouring countries or international traumas, such as the increase in energy prices. 

"We are always ready to help Jordan because Jordan is a highly appreciated member," Ahmed concluded. 

TEL AVIV — Israel's 2014 budget will be able to absorb the costs incurred during the 

monthlong Gaza conflict and there will be no need to raise taxes, Finance Minister Yair Lapid said on Thursday. Lapid added that it would take a week or two before the government could determine the total impact of the conflict on the economy. "Israel has a very strong, sustainable economy. We are more than capable to digest this operation into the 2014 budget," Lapid told Reuters. "Of course it's an expense we didn't expect, but then again, why have a strong economy if not for these occasions in which you have to react to the unexpected." Lapid earlier told a news conference: "Taxes will not be raised." He noted that the budget deficit target for 2014 was 3 per cent, and that prior to the monthlong military operation, the actual deficit was running at less than 2.6 per cent. "This means we have room below the target for unexpected expenses," he said. Lapid added the government was acting swiftly to compensate local businesses that were hurt during the military campaign.

PARIS — As populations age around the world, economies will be held back and growth trends will slow sharply in the next 20 years, a report forecast on Thursday.

The mismatch of old people to the numbers of people at work is no longer a shadow only over advanced economies; it now extends to emerging markets as well, a report by rating agency Moody's said.

This demographic time bomb, and related drop in household savings, could reduce the trend of annual growth worldwide by 0.4 per cent by 2019, the agency warned.

Between 2020 and 2025 the impact could be "much larger", amounting to 0.9 per cent, it said. 

Analysing the impact of a major shift in the age demographics of workers around the world, the agency indicated that more than 60 per cent of countries which feature in its credit ratings will be classified as ageing by next year, with more than 7 per cent of their populations aged over 65.

By 2020, it pointed out, the number of "super-aged" societies, where more than a fifth of the population are 65 and older, will increase from three today to 13. By 2030, the number will reach 34.

US-based Moody's monitors the resilience of public finances and issues credit ratings for government debt bonds.

Ageing a worldwide 'problem' 

When a population ages faster than it is replaced by people of working age who produce goods, services and wealth, the costs of providing for the aged can outstrip public and private resources available, over-stretching pensions systems, overburdening public finances and pushing up interest rates on the bond market. 

In its report, which was based on a sample of 33 developed and 22 emerging market countries, Moody's concluded that ageing is no longer "just a developed-world problem", with a broad spectrum of countries affected.

"Demographic transition, frequently considered a long-term problem, is upon us now and will significantly lower economic growth," said Elena Duggar, a senior vice president at the agency and one of the authors of the Moody's Investors Service report.

"The demographic dividend that drove economic growth in the past will turn into a demographic tax that will ultimately slow this growth for most countries worldwide," the report added.

The global working-age population will grow nearly half as fast in the years to 2030 as in the previous 15 years, increasing by only 13.6 per cent, down from growth of 24.8 per cent, Moody's estimated.

It said that all countries, with the exception of a handful in Africa, face either a declining working-age population, or a slower growth rate.

The working-age population will fall by more than 10 per cent in about 16 countries, including Germany, Russia, Ukraine and Japan, between now and 2030, the report indicated.

The authors highlighted a number of policy areas in which governments can mitigate the impacts of an ageing society on the economy, such as by increasing the number of women and young people who are available for work, and by raising the retirement age.

It said workplace innovation, higher productivity rates and "streamlined migration" could also help.

"Innovation and technological progress that improve labour productivity and human capital can also dampen the effects of the rapid demographic changes on economic growth over the long term," the report concluded.

Separately, an Associated Press dispatch shows that the 2008 financial crisis did more than wipe out billions in wealth and millions of jobs. It also sent birth rates tumbling around the world as couples found themselves too short of money or too fearful about their finances to have children. Six years later, birthrates haven't bounced back.

For those who fear an overcrowded planet, this is good news. For the economy, not so good.

We tend to think economic growth comes from working harder and smarter. But economists attribute up to a third of it to more people joining the workforce each year than leaving it. The result is more producing, earning and spending.

Now this secret fuel of the economy, rarely missing and little noticed, is running out.

"For the first time since World War II, we're no longer getting a tailwind," says Russ Koesterich, chief investment strategist at BlackRock, the world's largest money manager. "You're going to create fewer jobs.... All else equal, wage growth will be slower."

Births are falling in China, Japan, the United States, Germany, Italy and nearly all other European countries. Studies have shown that births drop when unemployment rises, such as during the Great Depression of the 1930s. Birthrates have fallen the most in some regions that were hardest hit by the financial crisis.

In the United States, three-quarters of people surveyed by Gallup last year said the main reason couples weren't having more children was a lack of money or fear of the economy.

The trend emerges as a gauge of future economic health — the growth in the pool of potential workers, ages 20-64 — is signalling trouble ahead. This labour pool had expanded for decades, thanks to the vast generation of baby boomers born in the first few decades after World War II in many countries. Now the boomers are retiring, and there are barely enough new workers to replace them, let alone add to their numbers.

Growth in the working-age population has halted in developed countries overall. Even in France and the United Kingdom, with relatively healthy birthrates, growth in the labour pool has slowed dramatically. In Japan, Germany and Italy, the labour pool is shrinking.

"It's like health — you only realise it exists until you don't have it," says Alejandro Macarron Larumbe of Demographic Renaissance, a think tank in Madrid.

The drop in birthrates is rooted in the 1960s, when many women entered the workforce for the first time and couples decided to have smaller families. Births did begin rising in many countries in the new millennium. But then the financial crisis struck. Stocks and home values plummeted, blowing a hole in household finances, and tens of millions of people lost jobs. Many couples delayed having children or decided to have none at all.

Couples in the world's five biggest developed economies — the United States, Japan, Germany, France and the United Kingdom — had 350,000 fewer babies in 2012 than in 2008, a drop of nearly 5 per cent. The United Nations forecasts that women in those countries will have an average 1.7 children in their lifetimes. Demographers say the fertility rate needs to reach 2.1 just to replace people dying and keep populations constant.

The effects on economies, personal wealth and living standards are far reaching:

— A return to "normal" growth is unlikely: Economic growth of 3 per cent a year in developed countries, the average over four decades, had been considered a natural rate of expansion, sure to return once damage from the global downturn faded. But many economists argue that that pace can't be sustained without a surge of new workers. The Congressional Budget Office has estimated that the US economy will grow 3 per cent or so in each of the next three years, then slow to an average 2.3 per cent for next eight years. The main reason: Not enough new workers.

— Reduced pay and lifestyles: Slower economic growth will limit wage gains and make it difficult for middle-class families to raise their living standards, and for those in poverty to escape it. One measure of living standards is already signalling trouble: Gross domestic product per capita — the value of goods and services a country produces per person — fell 1 per cent in the five biggest developed countries from the start of 2008 through 2012, according to the World Bank.

— A drag on household wealth: Slower economic growth means companies will generate lower profits, thereby weighing down stock prices. And the share of people in the population at the age when they tend to invest in stocks and homes is set to fall, too. All else equal, that implies stagnant or lower values. Homes are the biggest source of wealth for most middle-class families.

NEW YORK — US regulators warned Tuesday that 11 giant banks have unrealistic contingency plans in the event of bankruptcy and warned that if they fail they could plunge the world into a new financial crisis.

The Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) said the 11 titans, popularly known as “those too big to fail”, must make better plans to restructure their firms if they get into trouble.

FDIC Vice Chairman Thomas Hoenig said they had failed to show “how, in failure, any one of these firms could overcome obstacles to entering bankruptcy without precipitating a financial crisis”.

“The plans provide no credible or clear path through bankruptcy that doesn’t require unrealistic assumptions and direct or indirect public support,” Hoenig warned.

The group comprises JPMorgan Chase, Goldman Sachs, Deutsche Bank, Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Morgan Stanley, State Street and UBS.

Living will 

Wayne Abernathy, executive vice president at the American Bankers Association, said the banks will now be able to rework their plans based on the FDIC’s criticism. 

Up until this point, the industry has not known what regulators wanted, he complained, rejecting the calls from some expert critics and US lawmakers for large banks to be broken up.

“This isn’t a question of whether a bank is too big,” Abernathy said. “This is a question of a tool that needs to be refined.”

Under the Dodd-Frank Act enacted in response to the 2008 financial crisis, the banks must demonstrate a strategy “for rapid and orderly resolution” in the event of bankruptcy or major financial distress.

But the submissions by the financial giants fail to adequately prepare a so-called “living will” that could avert disaster, FDIC said. 

The rule was intended to address the problem of having financial institutions that are “too big to fail” because their demise could wreak havoc on the broader economy.

Tuesday’s announcement marks a second rejection of the banks’ planning by regulators. US financial agencies found fault with the original bank submissions in April 2013. 

Excessively leveraged  

Regulators have noted “some improvements” since the first round, but still point to huge flaws. The banks have until July 2015 to make “significant progress” to address the shortcomings identified.

At a recent congressional, hearing, Senator Elizabeth Warren pointedly questioned Fed Chair Janet Yellen on the adequacy of the industry’s contingency plans.

She suggested some of the banks should be broken up and noted that JPMorgan is far bigger than Lehman Brothers was when it failed in the early stages of the 2008 financial crisis.

Hoenig warned that banks today are “generally larger, more complicated and more interconnected” than they were prior to 2008.

The large banks are also generally “excessively leveraged” compared with the banking industry as a whole, he remarked. 

The regulators listed a series of actions expected of banks in their next submissions, such as simplifying their legal structure and amending financial contracts with counterparties in an insolvency.

Abernathy said the suggested measures were possible, but warned against indiscriminate moves to break up the financial behemoths.

Replacing the 11 banks with 40 smaller banks would “reduce diversification” and the banks’ “ability to handle the transactions their customers need”, he indicated. “I think that’s economic chaos.”

Separately, Moody’s Investors Service has revised down its outlook on British banks, saying new regulations designed to prevent taxpayers having to stump up funds to rescue failing banks make them more risky investments.

Moody’s said on Tuesday it had downgraded its view of the sector to “negative” from “stable”, citing plans by Britain’s financial regulator to introduce new rules for the rescue of ailing banks and to force lenders to ring-fence their retail operations from riskier investment banking operations which could be allowed to fail.

In the past, British banks had benefited from an implicit guarantee that the government would not allow them to fail. The new regime would see bondholders and big depositors take hits when large banks need rescuing.

Britain pumped a combined £66 billion ($111.3 billion) into Royal Bank of Scotland and Lloyds Banking Group  to prevent their collapse during the 2008 financial crisis.

Moody’s said the new rules “are designed to prevent the use of taxpayer funds to support failed institutions and to facilitate the going-concern loss-absorption of creditors, including senior unsecured bondholders”.

“The key driver of the change in outlook to negative for the UK banking system is that the UK government is now able to finalise the secondary legislation to implement the structural reforms relating to the UK resolution and bail-in regime and the related ring-fencing framework,” said senior Moody’s analyst Carlos Suarez Duarte.

WASHINGTON — African leaders on Tuesday called for a deeper economic relationship with the United States, hailing investment pledges totalling more than $17 billion at a Washington summit as a fresh step in the right direction.

US and African companies and the World Bank pledged new investment in construction, energy and information technology projects in Africa at the US-Africa Business Forum, including several joint ventures between US and African partners.

“The United States is determined to be a partner in Africa’s success,” President Barack Obama said in a speech at the forum. “A good partner, an equal partner, and a partner for the long term.”

The US president also urged African officials to create conditions to support foreign investment and growth.

“Capital is one thing, development programmes and projects are one thing, but rule of law, regulatory reforms, good governance, those things matter even more,” he stressed.

African leaders said they were optimistic of becoming full partners in a relationship worth an estimated $85 billion a year in trade flows, as US business leaders eyed opportunities in the region, home to six of the world’s 10 fastest-growing economies — even if they might be late to the party.

“We gave it to the Europeans first and to the Chinese later, but today it’s wide open for us,” said the chief executive of General Electric Co., Jeff Immelt, who on Monday announced $2 billion to boost infrastructure, worker skills and access to energy.

Tanzanian President Jakaya Kikwete said Africa wanted to move away from a relationship of “aid donor and aid recipient” to one of investment and trade.

Kikwete told the forum that with Obama and senior officials encouraging the business community “to take Africa seriously, I think this time we will make it”.

More than 90 US companies participated in the forum, part of a three-day summit which has brought almost 50 African leaders to the US capital, including Chevron Corp., Citigroup Inc., Ford Motor Co., Lockheed Martin Corp., Marriott International Inc. and Morgan Stanley.

Many already have a foothold in the region, which is expected to have a larger workforce than China or India by 2040 and boasts the world’s fastest-growing middle class, supporting demand for consumable goods.

Working as partners 

The Coca-Cola Co. said it would invest $5 billion with African bottling partners in new manufacturing lines and equipment, as well as safe water access programmes, over six years, and the chief executive of IBM, Ginni Rometty, said the IT giant would plow more than $2 billion into the region over seven years.

Still, Aliko Dangote, the president of Nigeria’s Dangote Group, whose operations include cement making, flour milling and sugar refining, said nothing works without adequate power.

Dangote signed an agreement to jointly invest $5 billion in energy projects in sub-Saharan Africa with Blackstone Group  funds, also calling for the US Export-Import Bank to remain open to support African companies buying US goods.

The World Bank, which committed $5 billion to support electricity generation, estimates that one in three Africans, or 600 million people, lack access to electricity despite rapid economic growth expected to top 5 per cent in 2015 and 2016.

Obama took part in a discussion with chief executive officers and government leaders at the event, also attended by US Commerce Secretary Penny Pritzker as well as former president Bill Clinton and former New York mayor Michael Bloomberg.

“These deals and investments demonstrate that the time is ripe to work together as partners, in a spirit of mutual understanding and respect — to raise living standards in all of our nations and to address the challenges that impede our ability to develop closer economic bonds,” Pritzker said.

Pritzker added that Washington would boost efforts to build commercial ties, with more government help on financing and more trade missions going both ways.

“The time to do business in Africa is no longer five years away. The time to do business is now,” she emphasised.

Pritzker stressed that building trade and investments with Africa would be good for both sides, helping African countries develop and creating jobs in the United States.

“As Africa’s middle-class continues to expand, we hope to see our export numbers grow,” she said.

“With a young, dynamic population and a burgeoning private sector, Africa is already a vital market for foreign investors. And that is why we are here today,” US Treasury Secretary Jacob Lew told political and business leaders.

“We want to drive more US investment in Africa, increase trade between Africa and the United States, and spur job creation both here and in Africa,” he said.

African telecoms billionaire Mo Ibrahim encouraged US  businesses to invest in Africa and make money but also said they should “pay their taxes”.

In the evening the African leaders joined Obama and his wife Michelle at a lavish dinner at the White House, where the president referred to his family ties to the continent.

“I stand before you as the president of the United States and a proud American. I also stand before you as the son of a man from Africa,” Obama said to applause. “The blood of Africa runs through our family, and so for us the bonds between our countries, our continents, are deeply personal.”  

But outside of a few top companies, US businesses faced criticism that they are less knowledgeable and more afraid of risks on the continent than their European and Asian rivals.

The United States remains the largest source of investment but most of that has been in the oil and gas sector.

China and Europe have built stronger positions in infrastructure, manufacturing and trade, with China’s trade with Africa more than double that of the United States.

American companies “are still thinking about Africa as a decade ago... whereas things have really changed dramatically. Africa now has been growing at about 5.5 per cent on average in the last decade,” said Dangote, Africa’s richest man whose fortune is estimated at more than $20 billion.

“There is a lot of perceived risk. People only talk about risk. But the majority of those who perceive risk don’t know the story. They have not really been there,” he added.

WASHINGTON — Hackers are increasingly slipping malicious software into online advertising, creating risks for the Internet economic model, security researchers said Tuesday.

A report presented at the Black Hat security conference indicated that "malvertising" has become increasingly prevalent and difficult for users to detect.

"Malvertising victims are infected with malware in the course of their normal Internet browsing and therefore have no idea where or how they were infected," said the report presented by Cisco security researchers.

"Tracing the source is next to impossible, because the ad that delivered the malware has long since disappeared," it added. 

According to Cisco researchers, the problem is especially thorny because almost any website can be infected with a "drive-by" ad and may not be detected either by the website operator or ad network.

"A malvertiser who wants to target a specific population at a certain time — for example, football fans in Germany watching a World Cup match — can turn to a legitimate ad exchange to meet their objectives," the report said.

"Just like legitimate advertisers, they contact companies that are gatekeepers for the ad exchanges. They will pay up front for the advertising, perhaps $2,000 or more per ad run, and instruct the companies to tell the ad exchanges to serve the ads as quickly as possible, leaving little or no time for the ad content to be inspected," it added.

Cisco said malvertising appeared to be used to distribute viruses which lock up a user's computer until he or she agrees to pay a fee — a system known as "ransomware."

The report described malvertising as a potentially huge problem because it could disrupt the massive market for online advertising.

CAIRO — Egypt plans to build a new Suez Canal alongside the existing 145-year-old historic waterway in a multibillion dollar project aimed at expanding trade along the fastest shipping route between Europe and Asia.

The Suez Canal earns Egypt about $5 billion a year in revenues, a vital source of hard currency for a country that has suffered a slump in tourism and foreign investment since its 2011 uprising.

The new channel, part of a larger project to expand Suez port and shipping facilities, aims to raise Egypt's international profile and establish it as a major trade hub.

"This giant project will be the creation of a new Suez Canal parallel to the current channel of a total length of 72 kilometres," Mohab Mamish, chairman of the Suez Canal Authority (SCA), told a conference in Ismailia, a port town on the canal. His comments were broadcast by state television.

He said the total estimated cost of drilling the new channel would be about $4 billion and be completed in five years, though Egypt will strive to finish it within a more ambitious three-year deadline.

The original canal, which links the Mediterranean and Red Seas, took 10 years of intense and generally poorly-paid work by Egyptians, who according to the   SCA, were drafted at the rate of 20,000 every 10 months from "the peasantry".

It took weeks if not months off journeys between Europe and Asia, otherwise necessitating a trip round the tip of Africa.

Egyptian President Adel Fattah Al Sisi, a former army chief, said the armed forces would be in charge of the new project for security reasons. 

Up to 20 Egyptian firms could be involved in the project but would work under military supervision, he added.

Any disruption to shipping along the canal tends to have a serious impact on trade and oil prices.

"Sinai to a large degree has a sensitive status. The army is responsible to Egypt for this," said Sisi, who has previously said he would not hesitate to award major projects to help revive Egypt's battered economy to the army.

The military, whose budget is not made public, has accrued a business empire ranging from automobiles to tablet computers and is seen by many Egyptians as more efficient than Egypt's government.

Some estimate the size of the military's business operations at up to 40 per cent of the economy, though Sisi says they are more like 2 per cent.

Memories of Nasser 

Sisi's allies and supporters have likened him to Gamal Abdel Nasser, the charismatic colonel who led a coup against the monarchy in 1952.

In 1956, Nasser nationalised the Suez Canal, leading to a failed invasion by Britain, which controlled the channel, as well as France and Israel. Nasser was praised by Egyptians for pursuing several big projects during his 14 years as president.

Pro-government Egyptian media did not hesitate to compare the Suez expansion plans to Nasser's own state-led infrastructure projects that were a source of national pride.

Egypt has planned for years to develop 76,000 square kilometres around the canal to attract more ships and generate more income.

Sisi said the new canal was an unannounced part of that project, which Egypt invited 14 consortia to bid for in January.

Reuters reported on Sunday that Egypt had chosen a consortium including global engineering firm Dar Al Handasah, as well as the Egyptian army, to develop the area.

A promotional video played at the launch event suggested the project would cut waiting times for vessels and allow ships to pass each other on the canal.

Mamish, the chairman, said the project would involve 35 kilometres of "dry digging" and 37 kilometres would be "expansion and deepening", indicating the current Suez Canal, which is 163 kilometres long, could be widened as part of the project.

Among the bidders, according to Egypt's Al Mal newspaper, were a group including state-run Arab Contractors and James Cubitt and Partners, an international consultancy firm. Another included the McKinsey & Co. global management consulting firm.

Gulf allies Saudi Arabia, the United Arab Emirates and Kuwait donated more than $12 billion in cash and petroleum products to Egypt after the army overthrew Morsi. But Egypt remains in dire need of longer-term investments.

AMMAN — Jordan Electric Power Company (JEPCO) narrowed losses during the first half of this year to JD7 million from JD9 million during the same period of the previous year. In a disclosure to the Amman Stock Exchange, the company revealed that total liabilities and equity rights rose to JD707 million compared with JD634 million. Income from sales reached JD437.7 million compared with JD359 million.