Business

AMMAN — Capital Bank of Jordan announced Monday in a press statement that the general assembly of shareholders has authorised capitalising JD16.5 million of retained earnings and raising the bank’s paid-up capital to JD181.5 million. As such, shareholders will get bonus shares at a rate of 10 per cent besides a 10 per cent cash dividends. According to Chairman Bassem Khalil Al Salem, the bank generated JD42.6 million after-tax profit last year, 98 per cent higher than the JD21.5 million recorded in 2012. The statement showed that the bank’s assets grew by 17 per cent to JD1,886 million at the end of last year and that deposits of clients rose by 18.8 per ecnt to reach JD1,140 million. The portfolio of credit facilities increased by 9.2 per cent to JD735 million at the end of 2013 compared to JD673 million at the end of the previous year.

AMMAN — The association agreement signed between Jordan and European Union (EU) states did not increase Jordanian exports to European markets, according to Senator Ziad Al Homsi, chairman of the Amman Chamber of Industry (ACI).

“The balance of trade tilted heavily in favour of the EU as Jordanian exports toatlled $142 million, whereas imports exceeded $2.5 billion,” an ACI press statement quoted Homsi as saying on Monday.

“Exports to Germany amounted to $7.3 million while imports reached more than $900 million,” Homsi added during a ceremony held by the ACI to mark the opening of an economic cooperation office at its premises.

The ceremony was attended by Ralph Tarraf, ambassador of Federal Republic of Germany to Jordan, and Khaldun Abu Hassan, chairman of the Jordanian-German Business Council.

According to Homsi, the Jordanian benefit from the association agreement with the EU is still limited, despite of its importance, compared with other trade agreements such as the Greater Arab Free Trade Area Agreement and the Free Trade Agreement with the US.

In the press statement, the ACI chairman mentioned legislative and regulatory barriers imposed by the EU, and the rules of origin requirements related to the Jordanian-European Association Agreement as the most important obstacle that faces Jordanian exports to European markets.

He underlined the importance of German technology transfer to the Jordanian industrial sector to qualify it to export to the European markets.

Tarraf said Jordan possess a solid industry capable of entering the European markets, adding that the German embassy will contribute to strengthening economic relations between both countries through several programmes, among them the economic cooperation office that was opened at the ACI with the support of German Agency for International Cooperation.

Fahmi Al Najjar, the Jordan-German economic cooperation consultant, indicated that  an integrated information network will be built through scientific consultancy centres and industry experts, in addition to expos and forums which will be held in Germany.

 Moreover, there will be full information about  the German market, export and import mechanisms, in order to assist Jordanian companies which are keen to export products to Germany, and also help to import machines and production lines from Germany.

The office will avail for companies and factories to benefit from the Senior Experts Service (SES) programme supported by the German government, which comprises more than 11,000 experts in all managerial and technical fields, to provide assistance for companies and institutions in developing countries voluntarily and at low costs, especially for the small- and medium-sized enterprises.

 “The expert will be recruited upon the company’s request, and depending on the sector and tasks demanded, the services can also be utilised in the health, tourism, management and other aspects,” the statement said.

“Ministries and official institutions can also benefit from the SES programme,” it added indicating that  nine industrial companies applied for this service besides two governmental ministries during the past period.

AMMAN — Jordan’s exports went up by 19.8 per cent in January, reaching JD407.6 million compared to JD340.1 million generated in the same month of 2013, according to the Department of Statistics (DoS) figures on foreign trade. The increase was driven by the increase in fertilisers and crude phosphate, said DoS, which noted that the amount of exports from fertilisers and phosphate went up by 416 and 14 per cent respectively. 

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Sunday discussed means to develop economic ties with Egypt during a meeting with Egyptian Ambassador in Amman Khaled Tharwat. The two sides underlined the need to support the establishment of joint ventures and investments, calling for drawing up an action plan to eliminate obstacles hindering the flow of commodities between both countries. Muard and the diplomat suggested holding a meeting between businesspeople from the two countries on the sidelines of the 10th Egyptian fair, which will be held in May in Amman. Jordan’s exports to Egypt stood at JD84 million last year, compared to JD500 million in imports from the North African country.  

KUWAIT— Jordan on Sunday underlined the significance of speeding up efforts for formulating an Arab Customs Union to boost inter-Arab trade.

“The formation of the union is crucial to increase inter-Arab trade estimated presently at about 10 to 11 per cent,” Hatem Halawani, minister of industry, trade and supplies and acting foreign minister, told reporters Sunday on the sidelines of a meeting for foreign Arab ministers in preparation for the 25th ordinary Arab Summit.

The minister said the Economic and Social Council of the Arab League will refer to the Arab leaders during the summit a resolution that stipulates drawing a roadmap to complete and discuss all issues that need to be addressed before the launch of the union in 2015.

Plans for the Arab Customs Union were announced at the Arab League’s 2009 Arab Economic and Social Development Summit in Kuwait.

The establishment of the union is planned to lead to an Arab common market by 2020, and to increase inter-Arab trade and integration.

“Such a union is key for boosting trade in the Greater Arab Free Trade Agreement,” said Halawani.

One of the resolutions to be submitted to the Arab leaders entails creating an Arab joint electricity grid project.

“Jordan at present is connected to Syria and Egypt, if this project is implemented all Arab states will be connected by one electricity network, which will positively affect the involved countries,” said the minister.

One of the main obstacles facing the implementation of the project is lack of financing, he added, noting that the resolution calls for addressing this issue and urging Arab and international financing institutions to play their role in this regard.

One of the proposals urges countries that have financial capabilities to allocate necessary finance to connect all Arab states through a railway system, said Halawani.

Arab states, he added, are also expected to draft a strategy to enhance water cooperation and ensure water security, a matter, which he described as important and crucial to the Kingdom.

Proposals also include one to discuss creating an Arab investment zone, Halawani concluded.

AMMAN — The Joint Jordanian-Hungarian Economic Committee signed a protocol agreement following their first meeting that was held recently in Budapest, according to a statement that was received by The Jordan Times on Saturday. Under the protocol, signed by Planning and International Cooperation Secretary General Saleh Kharabsheh and Hungarian State Secretary for Foreign Affairs and External Economic Relations Péter Szijjártó, the two sides will work to boost cooperation in the fields of energy, environment, water, agriculture, tourism, transport and infrastructure. Moreover, representatives from the two countries’ private sectors convened several meetings in a bid to increase cooperation between them and eliminate obstacles hampering the export of Jordanian fruits and vegetables to Hungary. Talks also focused on efforts to encourage more Hungarian tourists to visit Jordan as well as education cooperation.

TOKYO — Japan passed last week its biggest-ever budget, a $937 billion spending package aimed at propping up growth as consumers brace for the country’s first sales tax hike in over 15 years.

A total of 136 lawmakers in the 242-member upper house, controlled by the ruling Liberal Democratic Party, voted for the package, against 102 opposition votes, a parliamentary spokesman said. 

The passage came after the lower house last month approved the 95.88 trillion yen ($937.4 billion) budget for the fiscal year starting in April.

The new budget comes as Tokyo pushes for speedy implementation of a $50 billion stimulus package specially designed to protect Japan’s fragile economic recovery, as sales taxes rise to 8 per cent from 5 per cent on April 1 — the first hike since the late nineties.

The increase is seen as crucial to bringing down Japan’s eye-watering national debt, which is proportionately the worst among rich nations. 

But there are fears it will derail Prime Minister Shinzo Abe’s policy blitz, dubbed Abenomics, aimed at kickstarting the world’s third-largest economy after it suffered years of growth-denting deflation.

“I would like to continue making strong efforts to end deflation and grow the economy,” the conservative Abe told a parliamentary session Thursday.

The proposed package — up from 92.61 trillion yen for the current fiscal year — is seen as key to paying for Japan’s snowballing health and social welfare costs. 

The country’s rapidly ageing population is putting pressure on the public purse, while low birthrates are threatening to create a demographic time bomb for the heavily indebted nation.

Japan’s projected primary balance deficit — the shortfall between what the government takes in and what it spends, apart from debt-servicing — is expected to shrink by 5.2 trillion yen to 18.0 trillion yen.

That means Japan’s national debt, now more than twice the size of the economy, will continue to rise, but at a slower pace.

Public spending projects are part of the proposed budget as well as plans to upgrade Japan’s defence forces, as China bulks up its military and fears remain over North Korea’s nuclear arms potential.

Separately, Bank of Japan (BoJ) Governor Haruhiko Kuroda on Thursday marked his first year in the job, with critics giving a mixed report card on his unprecedented monetary easing programme.

Abe hand picked the former Asian Development Bank boss to help lead Tokyo’s bid to jumpstart growth and reverse years of deflation which held back the once world-beating economy.

Within weeks of stepping into the job on March 20 last year, Kuroda had unleashed a vast asset-buying programme — similar to the US Federal Reserve’s quantitative easing — which sought to pump huge amounts of money into the financial system.

The move, which sharply weakened the yen, was meant to jerk the economy out of its slumber and create lasting inflation in a country where falling prices had become the norm. 

While deflation may sound good for consumers, it means people tend to put off buying in the hope of getting goods cheaper down the road, hurting producers.

The BoJ programme was aimed at changing that psychology.

Deflationary “expectations — a sense that prices would not increase — became entrenched”, Kuroda said in a speech last week.

“In order to escape such a situation, it has become necessary to pursue a policy that quickly and drastically changes people’s sense that prices will not increase,” he added.

The conservative Abe, who swept to power in late 2012, had openly criticised Kuroda’s predecessor Masaaki Shirakawa for not doing enough to stimulate growth, a rare public rebuke that sparked fears the BoJ’s independence was under attack.

On Thursday, Kuroda gave some credit to his BoJ predecessors, saying that earlier policy has yielded results “to some extent” during 15 years of deflation. But he noted that it “was not sufficient” to keep falling prices from becoming entrenched.

Tokyo’s more recent efforts appear to be gaining traction. The weaker yen boosted the profitability of exporters like Toyota and Sony, and set off a 57 per cent rally in the Nikkei 225 stock index in 2013, its best annual run in over four decades.

Growth led Group of 7 nations in the first half of last year, although the pace has slowed since, while business confidence remains high and inflation appears to be taking hold.

Recent data showed consumer prices logged their first annual rise for five years in 2013, and land prices are up in major cities for first time since the global financial crisis in 2008. Big firms have also heeded Abe’s call for wage hikes.

Kuroda gets ‘high marks’

“Generally speaking, the market has given high marks to Mr. Kuroda’s BoJ, and I agree with the consensus view,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“There were some who were sceptical about the effectiveness of his massive easing measures, but actually the yen fell while stock prices rallied. This is in sharp contrast to the BoJ’s past policies that were often criticised as too little, too late,” he added.

Some critics have dismissed the plan as a money printing exercise that will leave Japan in bigger debt. The country already has the heaviest debt burden among rich nations at more than twice the size of the economy, a figure that promises to expand as a rapidly ageing population strains the public purse.

David Beim, a finance professor at New York’s Columbia University, cast doubt on whether the BoJ’s attempts to pump money into the financial system through reserve-rich commercial banks was having much impact.

“What is in theory supposed to happen is that, as the central bank expands its balance sheet, the commercial banks expand theirs, thereby expanding the money supply... which stimulates the real economy,” he said in a recent e-mail to AFP. “But when commercial banks already have massive excess reserves, this does not happen.”

There is also growing scepticism among analysts and even some bank board members about the BoJ’s ambitious target to hit 2.0 per cent inflation by the end of next year. 

A recent poll by Kyodo News showed nearly three-quarters of Japanese people felt no effect from Abe’s spending-and-easy-money blitz.

The tax increase has boosted speculation the BoJ would be forced to further expand its easing plan to protect the economy amid fears consumers will be scared off by higher prices.

“How to deal with market expectations that the BoJ will announce fresh easing is a delicate matter. If the BoJ holds off, that may disappoint markets,” Dai-ichi’s Shinke said.

“On the other hand, if the bank announces additional easing, that means the current easing programme was not sufficient and that the economy is not living up to the bank’s expectations,” he added.

AMMAN –– A team of experts will work on drafting a “modern” investment law to be presented to the government and lawmakers. 

During a recent session at Talal Abu Ghazaleh Organisation (TAG-Org) to talk about the current investment and business environment in Jordan, experts reviewed recommendations made by a group of economists and experts and highlighted the need to improve legislations governing investments. 

TAG-Org has formed several committees to address economic issues in the Kingdom, including a special panel for investment and doing business. 

The investment panel is headed by Maen Nsour, former chief executive officer of the Jordan Investment Board. 

Talal Abu Ghazaleh, chairman and founder of TAG-Org, indicated that the team will send a formal letter to MPs to explain the flaws in the investment draft law currently being debated by the Lower House Economic and Investment Committee, saying the legislation includes several negative issues that affect the inflow of investments in the country. 

At the session, attended by former ministers, MPs and a large number of businesspeople and economists, Nsour detailed the recommendations made by the team, highlighting several obstacles hindering better investment environment in Jordan. 

Among the obstacles, he said, is the lack of harmony between economic and investment policies, the fact that there are several government agencies concerned with the investment sector, and the drop in Jordan’s ranking in international business reports. 

There is a dire need to draft “modern” investment strategies to meet the current regional and international conditions, Nsour said. 

The Lower House should also give priority to economic legislations, he added, calling for equipping investors with the necessary information that are related to the Kingdom’s economy and business climate. 

He said: “The panel had also stressed the need to establish development banks such as industrial and agricultural banks to offer long-term and cheap financing”. 

Nsour also highlighted the need to target Jordanian expatriates in order to attract them for carrying out investments in the Kingdom.

CAIRO — Egypt’s stock market has reached a new high this week despite unrest in the country, surpassing levels prior to the 2008 global economic crisis.

The stock market has experienced a steady growth this year, particularly since the military’s ouster of former Islamist President Mohammed Morsi last July. Traders say investors are reacting positively to the military-sponsored political roadmap for the country.

Hesham Turk, the exchange’s communications manager, said Thursday that the market’s main index, EGX30, peaked the day before to levels higher than on September 9, 2008, and was expected to make additional gains.

However, the market’s rise has not alleviated daily economic hardships for many Egyptians.

Separately, Egyptian Army chief Field Marshal Abdel Fattah Al Sisi may not look like a model democrat, but foreign and local businessmen believe he can deliver stability to open up investment opportunities in the most populous Arab nation.

Sisi, whose smiling face, framed in sunglasses and capped by a beret, appears across Egypt on posters, t-shirts and even chocolates, inspires fear in his opponents that the country will soon have a military man as its president once again.

But to investors, and many Egyptians, Sisi offers the hope of relief from three years of political turmoil that began with the Arab Spring uprising, even though he was the man who toppled Morsi.

“I think most investors would say it doesn’t appear all that democratic, but it’s more stable, so my investment will be safer,” said Gabriel Sterne of Exotix, a frontier market bank in London which handles investments in Egypt.

Once in office, he will need to deliver on the economy which he has acknowledged presents huge “challenges”, without saying  publicly how he intends to tackle them.

Sisi is regarded as a decisive figure who can take bold decisions. After two changes of government in three turbulent years, Egyptians crave economic and political calm, and Sisi is seen as the man who can deliver.

Western investors appear to agree. “He does seem to have support that has been absent from any single politician. Whatever it is, it’s a sign of stability,” said Sterne.

‘Strongman’

Egyptian Industry and Investment Minister Mounir Fakhry Abdel Nour says he realises Western governments are wary of Sisi’s change from camouflage fatigues to a president’s business suit, but he believes investors will thank him for it.

“In the West, a candidacy and maybe the election of an army officer or an ex-officer to the presidency of a developing, third world country would raise eyebrows and call to mind the image of a Pinochet rather than a George Washington,... a dictator rather than a reformer,” he said.

“[But] this country as it stands today needs a strongman that can pull it together... Law and order is good towards investment and towards the economy,” the minister added at Cairo’s ornate 19th century bourse.

Gulf aid pours in 

Serious progress on the economy remains elusive. Massive debt, a weak Egyptian pound and political uncertainty had scared away much foreign direct investment (FDI).

However, billions of dollars in aid from the military-backed government’s allies in the Gulf have improved prospects for infrastructure growth and bought time for economic reforms.

The current account ran a $757 million surplus between July and September last year, driven by a massive increase in official transfers from Gulf monarchies such as Saudi Arabia and the United Arab Emirates (UAE).

Egyptians’ household spending climbed last year. Analysts say Samsung of South Korea is likely to pour tens of millions of dollars into its local assembly plant, and Coca-Cola announced a half-billion-dollar investment in Egypt last week.

“Strong business and strong communities go hand-in-hand and our investment not only helps to create good jobs, opportunity and a better tomorrow for Egyptians but also sends a strong signal about Egypt’s future,” said Curt Ferguson, President of Coca-Cola’s Middle East and North Africa Business Unit.

Overall, FDI remains sluggish. It edged up to $1.25 billion between July and September last year from $1.16 billion in the same period of 2012. FDI totalled $3 billion in the year ending June 2013, when Egypt was in turmoil, almost $1 billion less than in the previous year.

Before the 2011 revolution which toppled autocratic president Hosni Mubarak, a former air force commander, Egypt was attracting net FDI of around $8 billion annually, according to central bank data.

But with Egypt’s stock market hitting a five-year high and the global economy in a much better state than in Mubarak’s last years in office, Sisi should enjoy an easier investment climate.

A report by Bank of America Merrill Lynch last month described a Sisi presidential bid as “market-friendly in the near term”, saying that keeping up the Gulf aid or agreeing a loan from the International Monetary Fund (IMF) was crucial.

But it sounded a warning over Sisi’s holdover of officials and policies from the Mubarak era. Mubarak enjoyed some economic successes, but his rule was widely seen as corrupt and inept.

“The Egyptian political transition is likely to be complete in 2014 but could result in a watered down version of the pre-revolution regime... This will likely weigh on growth, and keep fiscal and external financing vulnerabilities high,” it said.

Stating the obvious

Though Sisi has been omnipresent on Egyptian television, he has offered few pointers on economic policy beyond stating the obvious in a speech last week: “I am saying it with the utmost sincerity. Our economic conditions are so, so difficult.”

More interestingly, he broached the issue of fuel subsidies that cost the government $15 billion a year, a fifth of the state budget, but gave no clear prescription.

The subsidies, in place for half a century, drain foreign currency that could be used to pay off debts to overseas energy companies and improve payment terms to encourage investment.

Abdel Nour hinted that Sisi may be able  to absorb the public anger that major cuts to the subsidies are likely to provoke. 

“I think he will be able and probably willing to draw on his popularity to take the difficult and often painful decisions to reform the Egyptian economy and face the fiscal problems,” he said.

Lifeline from the Gulf

Dubai firm Arabtec signed a $40 billion deal this week to build a million homes in Egypt, a possible sign of politically-inspired Gulf investment in the country’s infrastructure. Arabtec’s chief executive officer said the UAE would provide initial financing, signalling that Gulf companies’ Egyptian investments will enjoy government backing and protection.

Because many Gulf firms are partly state-backed or family-run, their more cohesive base of shareholders may be more easily convinced to plunge into Egypt when Western firms would hesitate.

“They’ve got a different variety of people they have to answer to, and not all of them work in conjunction in the West,” said Angus Blair, chairman of business and economic forecasting think-tank Signet.

Western investors, worried by repeated spasms of violence in recent years, are more sensitive and shareholders have a more short-term outlook, according to Blair.

Analysts agree that the flood of cash and confidence from the Gulf into Egypt has encouraged Western investors to follow, but are split on whether long-lapsed negotiations for an IMF loan, which would demand tough budget reforms, are the answer.

“In the end there’s nothing like a good old-fashioned IMF-type fiscal adjustment to put the position on the straight and narrow to provide long-lasting confidence, because you never know when these [Gulf] gifts finish,” said Sterne of Exotix.

But legal obstacles, not a binding international agreement to curb Egypt’s rampant corruption and soaring subsidies, may be what holds Western companies back. “Legislation is as badly needed as subsidy reform, it is just not in the spotlight,” said Moheb Malak, Cairo-based economist at Prime Securities.

A draft investment law aims to prevent third parties from challenging contracts made between the government and an investor, a move designed to attract investment.

The clauses are intended to reassure investors unnerved by previous legal challenges to such deals, some of which have left companies sold by the government in legal limbo. “Yes, Egypt needs a strongman but it needs a lot more than just a strongman, it needs to correct its investment policy,” Malak added.

MOSCOW — President Vladimir Putin told company bosses on Thursday to bring their assets home and clean up their businesses to help Russia survive Western sanctions over Crimea, and an economic downturn.

Facing a possible widening of Western sanctions that may target businessmen close to Putin, some of Russia’s oligarchs are increasingly nervous about their companies’ prospects.

Some of Russia’s largest companies are registered abroad where they may benefit from lower tax rates but also may enjoy some distance from the Kremlin and feel beyond its reach.

Without referring to Russia’s annexation of Ukraine’s Crimea region or to slowing economic growth, Putin said it would also be in the bosses’ interests to support the Russian economy.

“Russian companies should be registered on the territory of our nation, in our country and have a transparent ownership structure,” Putin told heads of Russia’s largest companies.

“I am certain that this is also in your interests,” he said, pressing home a patriotic message at a conference full of businessmen, including a front row of top oligarchs such as media mogul Alisher Usmanov and metals magnate Vladimir Potanin.

Putin waged war on the oligarchs who amassed political influence as well as vast riches under former president Boris Yeltsin, driving some out of Russia and forcing those who remained to stay out of politics.

Since then, several businessmen with ties to Putin have come to dominate the corporate landscape and are now among Russia’s richest men.

His words may have made some oligarchs nervous. Usmanov’s Internet holding group Mail.Ru is registered in the British Virgin Islands, while X5 Retail Group, owned by Mikhail Fridman, who was not at the conference, is registered in Amsterdam.

Returning to the Kremlin in May 2012 for a third presidential term, Putin has urged politicians and businessmen to return from the “offshore shadows” and stop spiriting cash out of the country, a move some critics say was a move by a weakened president to ensure loyalty among Russia’s elite.

But with sanctions imposed by the United States and European Union (EU) on officials, his demands are carrying more weight, ensuring there will be little public sympathy for oligarchs who may be stung by widening punitive measures.

“Our task is not only to limit the possibilities of offshore schemes,” Putin said. “We understand perfectly well that little can be achieved through prohibitions. The main direction of our work is in something else: it is necessary to increase the attractiveness of the Russian jurisdiction, improve the business climate, and strengthen legal guarantees and the protection of property.”

Fear of sanctions to come

The conference, days after Putin signed a treaty on bringing Ukraine’s Crimea region into Russia, was surprisingly upbeat despite the threat of deeper sanctions by the United States and EU, Russia’s top trading partner.

Many Russians have been swept up in nationalist fervour since Moscow annexed Crimea. But bubbling under the surface, there were some doubts as to what lay ahead.

Putin’s moves in Ukraine have wiped $50 billion off Russia’s stock market this month, sent the rouble down 9 per cent since the beginning of the year and further weakened Russia’s poor investment climate.

The economy grew 0.7 per cent in January, a slowdown from 1 per cent the previous month and analysts expect it to slow further as the impact of the crisis in Ukraine is felt.

“The integration of the global economy has reached such an extent that any split in economic ties cannot happen without consequences,” said Usmanov, a close ally of the Kremlin. “Therefore we do not need sanctions.”

Potanin, who owns a stake in the world’s largest nickel and palladium producer Norilsk Nickel, noted that he had worked out a contingency plan, just in case. 

“Sanctions are a double-edged sword, it’s not clear who will be more hurt,” he said.

Most business owners know that this time the government will not prop them up, as it did during the 2008/2009 global financial crisis when Russia burnt through billions of dollars from its reserves to support its largest companies.

“We will watch how the situation develops, in what direction both our economy and the situation in the financial sector go,” Finance Minister Anton Siluanov told the same conference.

Siluanov said the government would, if necessary, support Russia’s most important companies and institutions, but it did not have the resources to offer help to the majority of companies.

“We do not want to be helping company owners all the time,” he remarked.

Putin was clear that Russia’s economy would develop on its own terms, and would do his best to reward loyal companies.

He said Russia should find ways to help Russian companies win contracts with state companies while holding competitive auctions with foreign companies to please what he called the more liberal economists in this room.

And while he knew business would like more flexibility in reducing the workforce, he would always consider the “social aspects” of these “difficult problems” — a clear reference to Russia’s monocities which are dependent on certain industries.

“We will do this,” he said. “I hope you understand me correctly.”